Fresh orange juice, 170 regulatory notifications and a 2022 recap
9th December 2022
During the winter months, I usually embark on some sort of winter wellness regime to help me get through the cold season, by having a glass of freshly made orange juice every day. As we all know, Vitamin C is great but like many other systems, a good immune system needs more than just a glass of orange juice to function well. Just like in the fund business, different elements must align for things to work well. It is fair to say that in 2022, the elements did not align favorably for our industry.
Very few would disagree with the fact that 2022 was a very difficult year for fund managers. Most asset classes nosedived substantially, add to these falling valuations, the fund industry suffered some of the biggest net outflows after record years of inflows in 2020 and 2021. Naturally, shrinking assets under management led to significantly lower revenues and so many firms will find themselves starting 2023 on the backfoot.
During times of uncertainty, investors need more contact with fund managers, more reassurance, more handholding and quite simply a lot more client servicing and interaction with the people who manage their money. Asset managers who recognize this and take the time to evaluate their strengths and weaknesses to meet this need, can create a real strategic advantage in the difficult year ahead. But where to find the time?
Leaving the investment side of fund management aside, from an operational standpoint, the fund business is extremely work intensive. One could say it takes a village to launch and run a fund. Negotiating distribution agreements, managing operations well so funds become investable, taking care of oversight duties, managing complex data and its distribution, or dealing with multi-level commission flows are all critical tasks. And then there is regulation. It is a constant challenge to stay on top of the 170 published regulatory notifications that, according to our count, have been published this year alone. 42 of which relate to sustainable finance, by the way. Although these are important issues for us, they are not necessarily front of mind for investors and a cost effective and efficient operational infrastructure is certainly not going to win anyone a fund manager of the year award. But efficiency matters because it frees up asset managers to address the growing needs of their investors.
To focus on one’s own strengths is always good advice. Partnering up with a service provider who is specialized in these areas and outsourcing tasks can be a valid option to free up internal resource.
So what trends can we expect to see develop in 2023? For the lack of a crystal ball, I asked the OpenAInetwork:
- Increased use of technology (processes, platforms, analytics)
- Increased demand for transparency by investors (fees, performance, risk)
- Greater focus on and scrutiny of ESG investing
- Increased use of digital platforms (fund distribution, online portals, apps, automated investment services), and
- More personalized advice for investors
No real surprises there, more a continuation of existing trends we saw gathering pace in 2022. Orange juice, by the way, would have been a good investment choice in 2022, up 50%+ according to the numbers here.
I wish you and your beloved ones a calm festive season and a healthy start into 2023. At Acolin, we will continue to focus on our strengths and connecting our asset management clients to opportunity.