Following IMpower FundForum: An Impromptu Appraisal of Asset Management

On my return home from IMpower FundForum in Monaco, which involved a stunning €1 bus ride along the French Riviera, and a not-so-stunning delay in the Côte d’Azur airport, I took the time to deliberate the state of the asset management industry. Given FundForum is Europe’s leading conference for asset managers, wealth managers and service providers, it seemed appropriate to do so.

My assessment: Asset managers need to think hard about what their businesses will look like in the next three, five and 10 years (to use fund managers’ timeframes) and get their messaging ready today.

We know the challenges facing the industry: lower fees and squeezed margins, the seemingly unyielding rise of passives, and looming consolidation – challenges which are not all entirely distinct from one another. Firms consolidating means they can use their scale to push fees lower, as active managers look to compete with the passive shops.

Asset managers, particularly the specialist to mid-market size ones, know the challenges they’re facing. It’s a sector that requires reinvigoration. And for me, there are two paths to future proofing.

The first is taking the leap into private markets. This seems to be the industry’s chief priority right now. Beyond the main headline stage, the FundForum sessions with the most engaged audiences were ones where global asset managers displayed their commitment and expertise in private markets. That’s not to say that this leap should be headfirst. It should be a step taken while holding hands with regulators and policymakers to ensure they aren’t driving investors —  particularly retail investors — into illiquid and inappropriate investments.

Firms over the last 24 months have been making headlines (thanks in part to what we do at Prosek) as they acquire private markets businesses (see: BlackRock, State Street, Amundi). Lots of the moves by the big hitters make sense. After all, who am I to critique Larry Fink’s business plan? But some moves by the smaller European players look at best peculiar, and at worst desperate. I feel there is a sense of FOMO on the part of smaller managers. The big players have made their moves, leaving the rest of the sector scrambling to catch up.

The second path is doubling down on their commitment to active management. Asset managers doing what they are supposed to do, with products that are differentiated, additive to a portfolio by being a real diversifier (think trend-following, equity funds with downside protection, or merger arbitrage) or — and this one is tough — by having funds that beat their benchmark consistently.

Both of these paths will take some time as business transformation is a yearslong endeavor. But that doesn’t mean that firms need to be idle – branding and communications work can start today with an eye toward the future. (Yes, we realize this may conflict with UK firms’ love of waxing lyrical about their history.)

In a turbulent and highly competitive market, a unique point of view and authentic personality builds trust with audiences, so having a cohesive and differentiated brand strategy is imperative. Brand resilience means that goodwill has been built up with customers, which is vital currency if there is a slip up as they prepare their businesses for the future.

The best fund managers are the ones that take a long-term view and have conviction in their contrarian investment views. The same should be true of their branding and positioning.