Cost-cutting pressure, more internal management by asset owners and the potential for direct competition from non-traditional financial providers are among the biggest challenges money managers are facing, according to a State Street Corp. survey.
According to the survey of 400 global money managers conducted in April and May, 98% say they’re under pressure to cut costs, 81% see pension fund clients increasing their internal management, and 78% expect direct competition from companies like Google, Apple and Alibaba Group.
How managers see the challenge from those technology giants isn’t certain, said Jane Mancini, senior vice president and asset manager sector head at State Street in an interview. She said those tech firms “look at our industry and say, ‘That looks attractive.’ They may enter as providing advice, they might provide research. No one knows what they plan to do, but managers are still concerned.”
The pressure to cut costs is coming from managers’ clients, and although the survey did not specify where those cuts were being made, the data imply “that it’s from management fees, to be more competitive,” Ms. Mancini said.
Among other survey results:
- 72% of respondents said they are having more discussions with clients about risk;
- 64% say risk and compliance demands threaten to use resources from other critical business areas; and
- 79% say clients want more transparency.
The survey did not specify what business areas would see resources shifted to risk and compliance, Ms. Mancini said. “Those are very individualized decisions dependent on each asset manager,” she said.
Despite the challenges, 95% said they see the potential for growth from acquisitions, with 46% o those surveyed actively pursuing targets. “The number of those considering acquisitions seemed pretty high to me,” Ms. Mancini said. “That really stuck out.”
The vast majority of managers surveyed by State Street — 92% — had more than $5 billion in assets under management.