Institutional Asset Manager Newsletter 22.11.24

Fund managers need to keep the faith

You have to speculate to accumulate is an adage you’d except the asset and wealth management industry to live by, but a report from PwC published this week suggests the sector is underinvesting in the technology it needs to survive.
The consultancy surveyed 264 AWM and found 80 per cent believe that disruptive technology is fuelling revenue growth while 84 per cent say it is driving operational efficiency.
Yet, more than two-thirds (68 per cent) of asset and wealth managers allocate less than one-sixth of their total capital expenditure to innovative and potentially transformative technologies.
This, PwC says, begs the big question whether AWM organisations are "moving far and fast enough to capitalise on the opportunities and keep pace with the tech-driven shake-up in their industry".
The question is especially pressing for a potentially ‘squeezed middle’ set of companies that generally lack both the scale and sizeable investment budgets of their larger counterparts and the targeted niche focus of specialist players.
Such organisations may find they are vulnerable to takeover since they will be unable to keep up. No wonder then that, 81 per cent of asset and wealth managers are contemplating strategic partnerships, consolidations, or mergers and acquisitions to capitalise on the tech revolution.
Meanwhile those firms that are successful stand to enjoy significant gains in assets under management (AUM).
PwC predicts global AUM to reach USD171 trillion by 202 which is a 5.9 per cent compound annual growth rate (CAGR); up from the 5 per cent in last year’s analysis. Firms switched on to tokenised investment funds can expect CAGR of more than 50 per cent with AUM expected to exceed USD317 billion by 2028.
Albertha Charles, Global Asset & Wealth Management Leader, PwC UK, warns AWM organisations of the urgent need to rethink investment strategies, advice that would be well heeded if they want to survive in a new high-tech world.
Elsewhere we bring you news that asset managers are under pressure to better support faith-based investors.
The Church Investors Group (CIG), a coalition worth GBP26 billion, says they should not have to "make do with investment solutions which are not designed with Christian faith in mind".
The CIG has issued guidance to help faith-based investors better interrogate fund managers and ensure they can deliver strategies in line with their beliefs.
Faith-based investing has typically been lumped in with wider responsible strategies, but this is gradually changing.
Of course, it is impossible to gauge the size of the faith-based investment market since the information is not always made public, but if Inspire Investing, the world’s largest provider of faith-based ETFs, is anything to go back this is a burgeoning market.
From 2019 to 2022, Inspire posted a 268 per cent absolute growth rate and as of October this year, it has USD3 billion AUM of which USD1 billion was secured in just 18 months.
These are certainly increases that should encourage more managers keen to keep the faith.

Gill Wadsworth, Editor, Institutional Asset Manager
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