Asset managers slow to prioritise technology upgrades

10 November 2017   Category: News, Asia, Global   By Goh Thean Eu

Many asset management companies understand that technology is important in driving operational efficiencies, but only a few are prioritising technology upgrades in the near term, according to a senior executive at US asset management firm State Street Corp (State Street).

Mark England, State Street's senior managing director and head of asset management sales for Asia Pacific, says the industry must understand that adopting new technologies should not be done on an ad hoc basis.

“Adoption of emerging technologies is a journey. It will be iterative and not simply a project,” Mr. England says in an email interview with Asia Asset Management.

State Street’s global survey of more than 500 executives representing institutional asset owners, asset managers and insurance companies earlier this year found that 80% of respondents agreed that “achieving operational excellence is the most powerful strategy for bottom-line growth”. And yet, only 20% of respondents saw technology upgrades as a prioritised action for growth over the next year.

According to Mr. England, one of the key issues is a lack of resources.

“This is a big challenge asset management companies face when they explore and implement new technologies," he says. "I also think that many of the challenges are conceptual. In fact, staying ahead of the fast-paced developments is in itself a challenge.”

He adds that outsourcing will play an important role, as external partners can often “handle the non-core activities more cost effectively and efficiently than asset managers can themselves”.

“This frees the asset managers to pursue more differentiating and innovative initiatives,” he says. “Managers find themselves in a crowded and increasingly homogenous marketplace, so it is imperative that they couple their growth strategies with intelligent digital innovation that offers clear value for clients on investment approach and service quality.”

Although adopting technology can be painful, it can be very rewarding for early adopters.

“Leading investment banks are already using machine learning systems to increase the automation of pre-and post-trade process, and a number of asset managers have made real progress in this respect in the past 12 months,” Mr. England says.

“Benefits thus far include significant abbreviation of processing times in some instances, head-count reductions, reduction in error rates and ultimately some reductions in cost.”

He also sees blockchain technology – which allows a global network of computers to jointly manage the database that records crypto currency transactions – playing a bigger role in the asset management industry over the next few years. Over 75% of respondents in the survey predict blockchain will have an impact on their business over the next five years.

“We believe asset managers will need to look to external collaborations as they introduce innovative technologies such as blockchain. Some are already working with partners in the fintech community,” Mr. England says. “Early movers have joined cross-sector consortia, aimed at developing blockchain-based solutions that could transform the efficiency and speed of transactions.”