Synthetic intelligence (AI) was essentially the most raised concern up to now 12 months amongst asset supervisor respondents to the annual Index Business Affiliation (IIA) member survey. Sustainable investing, thematic investing, and customised funding, respectively, ranked as prime of thoughts after AI amongst survey respondents.

General, the outcomes illustrate that the asset administration trade in Europe and America is in transition, dealing with mounting ranges of complexity and a necessity for brand new partnerships, new and extra specialised info sources, new expertise, and stronger ecosystems and alliances.

Background

4 years in the past, IIA started publishing a survey in partnership with our member companies and fielded with the help of Opinium Analysis. Every year, we have interaction with 300 chief funding officers, portfolio managers, and chief monetary officers throughout a variety of funding suppliers in the USA and Europe to gauge how asset managers view progress in opposition to present challenges and alternatives, and the important thing elements shaping the longer-term evolution of the trade.

Once we began this endeavor in 2020, the purpose was to ensure index suppliers understood the long run wants of asset managers by way of environmental, social, and governance (ESG)- and sustainable-related indexes.

Based mostly on our learnings over the past three years and suggestions from our IIA members, we determined to broaden the 2024 survey past ESG- and sustainable-related questions. ESG and sustainable investing after all stay central and materials to world traders, however we needed to guarantee that our aperture was large sufficient to seize the complete pallet of drivers and tendencies impacting our shoppers. I’m so glad we took this strategy as our findings revealed a a lot deeper set of challenges, alternatives, hopes, and considerations. What is evident from this 12 months’s outcomes is that trade is dealing with rising complexities.

What Components Will Have Biggest Affect on Funding Efficiency?

We requested which elements over the subsequent 12 months would have the best affect on funding efficiency. Over the subsequent 12 months, asset managers are extra keenly centered on macroeconomic points like rates of interest, inflation, and a possible financial slowdown than they’re elections and geopolitical occasions. Notably, 81% of US respondents prioritized rates of interest and inflation as a very powerful points.

We requested managers what tendencies they’ve been serious about essentially the most over the last 12 months. I used to be shocked by the substantial variety of respondents who ranked AI as their most raised concern, overtaking sustainable investing. Different technological points like tokenization and blockchain had been solely raised by roughly 10% of managers. Managers centered on thematic funding and customised merchandise after sustainable investing. Solely about 25% recognized crypto merchandise as a subject they’re discussing with their colleagues — about the identical proportion as these serious about how you can deliver non-public markets into their companies’ choices.

Generative AI: A Sport Changer

One large dividend from our choice to develop the vary of subjects on this 12 months’s survey is the insights we gained round AI, and what it means within the eyes of asset managers.

ESG Exuberance Tempers

We revisited ESG and sustainable investing on this 12 months’s survey to see if the torrid tempo of progress cited in prior years was persevering with. What we discovered is that whereas ESG continues to be an important a part of world asset managers’ technique, the excessive expectations for future progress we noticed in prior years of the survey have tempered.

When considered over the four-year arc of the survey, survey respondent expectations for ESG portfolio implementation have come again to earth after the spike we noticed in 2022 and 2023, touchdown again down close to 2021 ranges. For us, this means not that ESG goes away, however moderately that it’s settling right into a extra reasonable long-term progress curve. As soon as once more, environmental elements (the “E” in ESG) proceed to be most on the radar of traders in relation to sustainability.

Personal Markets: A Puzzle to Clear up

Personal markets proceed to be an space of alternative for world asset managers but additionally an space of problem, in accordance with our survey. Whereas asset managers just like the idea of personal markets for funding alternative and diversification, they cited a number of challenges in relation to implementation.

Problem integrating non-public fairness into their funding lineup, liquidity considerations, and information gaps had been cited as top-of-mind points. This isn’t shocking given the traditionally sluggish tempo of the event of worldwide indexes which seize non-public fairness market information and efficiency.

Index Suppliers in Demand

Whereas our survey identified a number of classes that symbolize important challenges for our shoppers, it was encouraging to see that asset managers’ prime 4 areas to companion with index suppliers are for sustainable investing, direct indexing, thematic investing, and customised funding options. The survey reveals that greater than half of respondents imagine that index suppliers and the providers we provide will grow to be extra vital to their success within the subsequent 12 months. Importantly, about 20% anticipate to make use of extra index suppliers within the subsequent 12 months.

It is a very high-level snapshot of our survey findings. I invite you to take a deeper dive into this 12 months’s outcomes. I welcome your suggestions and solutions for future analysis.