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November 2020
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Asset managers plan to outsource costly non-core work to focus on investing, poll finds

According to the survey, 40 percent of the Asia-Pacific based asset managers, are considering outsourcing their middle-office and investment book of record functions, allowing them to focus on alpha-generating returns and solutions
By Goh Thean Eu   
October 22, 2020

Asset managers plan to outsource functions such as data management and middle and back office operations in order to cut costs and focus on their core job of generating investment returns for clients, according to a survey by US manager Northern Trust.

The poll found that 45% of respondents consider data management as the function most likely to be outsourced within the next two years. Some 40% are looking to outsource back room operations, and 38% at middle office functions.

The survey of 300 asset managers, including 40% in Asia, was conducted in the first quarter of 2020. Respondents’ assets under management range between US$10 billion and $500 billion.

According to Ryan Burns, head of global fund services at Northern Trust, asset managers are facing rising cost pressures, including those related to regulations and technology.

“That really lends itself to looking at outsourcing as an option, meaning that in a challenging economic environment, people are rightly taking stock of what activities are core and what are those that could be outsourced or performed elsewhere,” he says in the survey report published on October 20.

Mr. Burns says data management and middle and back office operations typically require investments in technology and manpower and are the most costly items in the operational infrastructure that asset managers have to maintain.

“So, when a manager looks at cost structure, those things probably leap to the top of the page in terms of costs being incurred today which will continue to grow over the next few years, and may be considered non-core and viable for outsourcing,” he adds.

Chicago-based Northern Trust had $1.3 trillion of assets under management as of end-June 2020.