Despite an economic downturn as a result of the pandemic, money managers are committed to their long-term technology investment plans, migrating client and investment data to the cloud, enhancing remote work capabilities and automating more business operations for better efficiency, sources said.
While some firms have attempted to wring out savings by renegotiating contracts with third-party service providers offering investment market data, research and cloud-sourcing arrangements, most global money managers are ultimately spending more on technology as they strive to meet new remote work demands, said Tyler Cloherty, senior manager and head of the knowledge center for Casey Quirk, a practice of Deloitte Consulting LLP, New York.
"There's been increased costs for laptops and collaborative software, like Zoom and Microsoft Teams," Mr. Cloherty said. Additionally, costs have increased as money managers continue to make longer-term investments in migrating company data to the cloud and on research portals for investment team data sharing, he added.
"I think during the initial downturn in March and April, there was a hesitation to embark on substantial new investments. Since the market has bounced back … third-quarter margin numbers are going to look much better," Mr. Cloherty said.
"Many firms were in a little bit of a holding pattern on (business) investments in the spring," but now "firms are starting to return to their long-term structural spending agenda," he noted.
At the end of 2019, annual technology costs were up 7% at global money managers, due to both increased head count and rising technology costs per employee, Casey Quirk found. On average, technology costs represent about 10.5% of overall operating expenses at money managers, and Casey Quirk foresees technology representing "a larger part of the overall cost structure of investment managers going forward," Mr. Cloherty said.
Total technology spend across all global money managers was $51 billion last year, he added.
Currently, the largest technology investments being made by firms are in technology to migrate institutional client data and investment data to cloud servers, Mr. Cloherty said.
Greggory Warren, a Chicago-based financial services sector strategist at Morningstar Inc., said in an email that BlackRock Inc. and T. Rowe Price Group Inc. are leading the pack as far as their technology budgets compared to competitors.
They are "spending more on technology than their peers because they have the excess capital to do so, and everyone has had to pay out to accommodate work from home, likely putting off other initiatives to cover that cost," Mr. Warren said in an email, noting also that "most of the publicly traded firms don't reveal how much or what they spend on when investing in technology."