The global investment industry is on the cusp of an initial wave of disruption and our competitive landscape and market outlook are shifting. How are buy-side leaders navigating the trends sweeping the sector? As we look ahead, we highlight some of the key themes shaping the industry.
Powerful forces rocking the investment landscape today include volatility in global markets, uncertainty caused by unprecedented technological disruption, the complexity of more stringent regulatory requirements and ambiguities in data. These forces together are creating a perfect storm demanding that investors and their service providers rethink, re-engineer and transform amid a surge in competition from non-bank service providers.
We can see these forces playing out in multiple ways today. Investors are demanding servicing solutions in environmental, social and governance (ESG) investing, as well as accessing untapped markets such as China. The trend is to rely on fewer service providers in order to achieve economies of scale and pricing power. This could result in a smaller number of one-stop-shop service providers dominating the market, offering extensive capabilities in addition to core custody services.
Alongside this, a “barbelling” of investment strategies – which sees institutional investors allocating at both ends of the risk spectrum – is concentrating assets in passive investments as well as alternative products such as private equity, private credit and real estate.
Cutting across these themes is a growing focus on data and digital innovation.
Firms operating today are under pressure not only to unlock their internal data, but also to integrate data from a range of third-party providers and derive analytics and insights to power decision-making. Achieving this means using technology and digital innovation to shape the operating model into one that is automated, resilient and responsive to new market realities.
More importantly, Asia’s growing economic clout has translated into greater roles and responsibilities for the region in the global economy, in which it is poised to play a pivotal role in shaping the future financial ecosystem. Buy-side leaders must be prepared to face unparalleled challenges and navigate a rapidly evolving environment.
BNY Mellon is out in front of these changes to equip our clients to adapt and capitalize. We are fully digitizing our company, reinventing each process, product and client interaction to adapt to new ways of thinking and working so everything we do is digital and in line with best standards and client expectations.
In doing so, we are deploying cutting-edge technology, such as machine learning and Artificial Intelligence (AI), to simplify processes and proactively deliver additional insights to clients. We have also adopted an open and cooperative approach to navigating the digital future of the investment industry, working alongside clients and together with other service providers to build an innovation network and digital ecosystem to provide enhanced value for our clients. And we are unlocking the value in data by deploying foundational data services that drive data-driven decision-making, business growth and innovation.
For our Asset Servicing clients, we are focused on improving and accelerating client information delivery, transforming client oversight and transparency, and providing data and analytics leveraging our established leadership in data management to unlock the power of data. By digitizing our business, we will be able to deliver new capabilities more quickly, provide our clients with richer insights, and integrate our core capabilities and digital delivery with that of best-in-class third-party solutions to offer our clients modular choices across their front, middle and back offices.
It is therefore paramount that institutional investors such as yourself consider how such trends will impact the growth of your organizations. This paper presents expert views from BNY Mellon and other industry leaders on the themes we see shaping the future of the investment industry.
Head of International, Chairman of EMEA