An Investment Process for a New Reality
Three Trends Shaping the Buy-side in 2021 and Beyond
An Investment Process for a New Reality
Three Trends Shaping the Buy-side in 2021 and Beyond
January 2021
Although the world has changed in ways nobody could have predicted at the start of 2020, COVID-19 and its attendant changes to the global economy and the future of work have not completely overturned the global investment industry. They have, however, exacerbated and accelerated disruptive forces that were already at work.
Asset owners and investment managers were grappling with long-term structural shifts, stemming from trends such as digital innovation reshaping operating models and business strategy, the democratization of data, and the hunt for yield requiring suitable tools and infrastructure to find new sources of return. Yet the effect of the pandemic has reinforced the urgency for buy-side leaders to build a future-proof investment process. From investment strategies to operational processes, all aspects of how investors make portfolio decisions today face ever-acute challenges.
These include:
- Muted interest rates putting pressure on yields
- Prolonged volatility and unpredictability in markets
- Heightened concerns over liquidity and correlation in mainstream assets
- Investors’ increased expectations related to transparency and user experience
- The need to adapt to frequent regulatory changes across geographies
- Escalating geopolitical instability, trade tensions and de-globalization
- Uncertainty over how long the impact of the pandemic will endure
Getting Ready for a New Tomorrow
The latest World Economic Outlook from the International Monetary Fund (IMF), in October 2020, highlights the importance of preparing for what the Fund predicts will be a “long, uneven and uncertain” recovery – on the back of projections that the global economy will contract by 4.4% in 20201.
Against this backdrop, asset owners and investment managers must adapt by developing the right capabilities and infrastructure across their front, middle and back offices to help them secure positive and sustainable growth.
We had already pinpointed the need for this type of transformation amid the key themes shaping the future of the global investment industry in “2020 and Beyond: A New Era of Transformation for Buy-side Leaders.”
Now, in the wake of COVID-19, not only have these trends endured, three of them have accelerated significantly:
- The development of digital-first strategies and mindsets that align with the acceleration of digitalized economies, and with more open and connected information ecosystems.
- The role of data and analytics as a key differentiator in driving solutions, reporting and insights, as well as enhancing efficiency, cutting costs and reducing risk.
- The search for yield via greater allocations to alternative investments and emerging markets, and the need for infrastructure to support this shift.
As buy-side leaders assess how best to respond and reposition themselves amid today’s challenging market environment, it is clear that a new approach is needed to business models, investment strategies and operational processes. To future-proof investment processes, asset owners and investment managers must account for and embrace changes related to these three trends.
