Asset managers examine product ranges in cost-cutting bid

Almost 70 per cent of asset managers are planning to control costs via product rationalisation, according to a global survey by Northern Trust, as they seek to offer clients a best-in-class experience.

In a survey of 300 senior executives at asset managers with less than US$500 billion across APAC, EMEA and North America, respondents were asked how they plan to control costs in the future. 

Some 69 per cent indicated they seek to achieve this via product rationalisation, and 66 per cent said system consolidation. Automation and technology, such as cloud technology and expanded use of artificial intelligence, were cited by 60 per cent of respondents. 

Respondents said the combination of product rationalisation and automation helps firms to work efficiently with limited resources and manage market volatility by ensuring only successful products remain available.

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“This two-pronged approach helps them balance cost control with the priority of improving the investor experience,” Northern Trust noted.

A further 83 per cent said they will change their product strategy in the next two years as they pivot their strategy to ensure a best-in-class experience for their investors. 

Last month, First Sentier Investors announced it would be closing four of its investment teams covering Australian fixed income, global credit, equity income and emerging companies.

Other firms noted it is becoming harder to launch new products which is another factor leading to product rationalisation. 

“There is a clear trend in asset managers clients that are looking to consolidate product and making sure that they are focusing on the strategies where they have the best opportunities for achieving distribution success.

“Designing fund products that will adhere to regulatory requirements, particularly ones that are relatively new concepts, is becoming increasingly difficult as the regulatory environment continues to evolve.”

However, one area where they are looking to make new launches is in ESG options in a bid to demonstrate to clients that they are meeting ESG commitments, particularly a focus for those asset managers in Asia Pacific. In Australia, this is potentially hastened by the corporate regulator’s focus on greenwashing and the introduction of mandatory climate reporting from the government. 

Commenting on the findings, Ryan Burns, head of global fund services at Northern Trust, said: “We see managers being focused on the ‘right product, right fit’ strategy. Coupled with system consolidation, both are effective tools to maximise a limited resource pool.

“Managers want to have the systems in place to be able to effectively run a more diverse product mix, but also take a hard look at which strategies have not been successful and decide if that is dilutive to their ability to launch new products.

“Having a consistent operating model is key to controlling costs, but equally, product rationalisation is a healthy exercise for asset managers to ensure they have the resources available to focus on distribution.”