Alternative assets drive product, operations changes
Changes in the investment environment, notably the growth of private equity and hedge fund investments, are likely to force financial services companies to rethink their organisational structures and products, according to a report from consultancy Deloitte Touche Tohmatsu.
Private equity funds attracted a record $261 billion in 2005, while inflows into hedge funds, despite a slight cooling during the year, reached $1 trillion worldwide.
According to the Deloitte report, Financial Services in 2010: Hallmarks of Success, the growth of individual hedge funds will continue to outpace other assets, although at a slower rate than experienced to date.
Deloitte partner of financial services assurance and advisory Gerry Schipper said alternative assets used sophisticated financial techniques and efficient methods of deploying capital, such as bulk trading.
He said that to compete, traditional financial services organisations would need to reduce margins, consolidate operations and incorporate hedge fund and private equity-like thinking into their business models.
Financial services companies will also need to be more innovative in developing products for retiring baby boomers, the report said.
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