Graphic: The revolution will be automated
The investment management industry emerged from the financial crisis with a bionic arm, as technology began to assist in the risk and investment processes. Managers are looking for an edge as equity returns are expected to be lower, and investors are less willing to pay higher active management fees. The switch to passive has squeezed margins and forced managers to look at technology to both reduce expenses and find alpha.
Call for action: Long-term equity returns are expected to be lower while non-existent alpha is keeping managers from standing out from their peers.
Falling margins: As cost moves to the forefront of investors' fund evaluation, revenue growth is slowing despite an increase in AUM. Some of the largest managers plan to offer zero-fee funds to some investors.
Operating alpha: Managers able to create more efficiencies for their portfolio managers achieve higher alpha, data from Forward Look show. Fully integrating data man- agement and dropping piecemeal IT systems has been a major focus for managers.
Quant comeback: Quant manager AUM growth has outpaced non-quants as quants can get more alpha at lower fees. Their technology quickly processes large data sets faster than humans, with less error.
Sources: Morningstar Direct, Bloomberg LP, eVestment Alliance, Simcorp, Forward Look Inc.
Compiled and designed by Charles McGrath and Gregg A. Runburg
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