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Institutional Asset Manager Global Outlook SPECIAL REPORT 2021

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Institutional Asset Manager Global Outlook SPECIAL REPORT 2021 Institutional Asset Manager Global Outlook SPECIAL REPORT 2021 In association with CONTENTSContents Chapter 1: State of the market Adapt to survive 05 How has the asset management industry emerged from the market volatility and pandemic of 2020? dapt to survive: this was the message for the asset management sector in 2020, which turned out to be one of the most extraordinary and unpredict- Aable years in living memory. Chapter 2: Asset growth In March, the onset of the Covid-19 crisis and national lockdowns caused stock 08 Will global assets under active management markets to lose a third of their value in one month, and mobilised an immense rise, level out or fall over 2021? digital transformation as swathes of the economy adjusted to home-working. The asset management industry weathered the storm better than most. Assets under management worldwide Chapter 3: Geographical split have risen to exceed USD110 trillion, thanks in part to a remarkable rebound in underlying financial markets, with 10 Which geographical areas will do the best in some indexes recouping their losses in as little as six months. terms of asset raising over 2021: UK, Europe, While vaccine roll-outs indicate the pandemic’s end may be on the horizon, many of the changes it has caused US, Canada, or Asia? are likely to stay – including a ‘lower for longer’ interest rates landscape and competition from passive investing putting more pressure on fees. Chapter 4: Trends Arguably the biggest shift asset managers have faced has been the pendulum of investor preferences, which 12 What fund strategies will dominate over 2021? has swung decidedly in favour of sustainable investing. 14 MSCI: How factor investing is reinventing At the start of 2021, a third of all assets under management in the US were held in sustainable strategies, asset allocation and three quarters of institutional investors in Europe said they plan to stop buying European non-ESG products within the next two years. Chapter 5: Fees The story for asset management in 2021 will be over whether it can keep up with the pace of change and 16 Will there be continued pressure on fees? thrive in a post–coronavirus world. We asked our asset manager and investment consultant audience eight ques- tions on their views for the year ahead: Chapter 6: Sustainable investing • How has the asset management industry emerged from the market volatility and pandemic of 2020? 18 What new trends might we see in ESG/ • Will global assets under active management rise, level out or fall over 2021? sustainable investing across the global asset • Which geographical areas will do the best in terms of asset raising over 2021: UK, Europe, US, Canada, or management industry over 2021? Asia? • What fund strategies will dominate over 2021? Chapter 7: Hunt for yield • Will there be continued pressure on fees? 21 What is your outlook on the yield landscape in • What new trends might we see in ESG and sustainable investing across the global asset management industry 2021? over 2021? • What is your outlook on the yield landscape in 2021? Chapter 8: Challenges ahead • What will be the biggest challenge for asset managers to overcome in 2021? 23 What will be the biggest challenge for asset Read their answers and thoughts in the following pages for an indication of what is to come for the asset man- managers to overcome in 2021? agement industry in 2021. Madeleine Taylor, Editor, Institutional Asset Manager INSTITUTIONAL ASSET MANAGER GLOBAL OUTLOOK REPORT | Jan 2021 www.institutionalassetmanager.co.uk | 2 A common language for Factor Investing MSCI FaCS™ VALUE SIZE MOMENTUM VOLATILITY QUALITY YIELD Vl Sz Mt Vo Qy Yd Put factors to work for your portfolio with MSCI FaCS. Learn more about Factor Investing at msci.com/factor-investing ©2021 MSCI Inc. All rights reserved. 297x210mm-MSCI-FaCS-ad-en.indd 2 12/01/2021 17:15 Chapter 1 State of the market Everyone in the asset management industry had the chance to stress test its organisation, and overall passed. Jan Erik Saugestad, Storebrand Asset Management INSTITUTIONAL ASSET MANAGER GLOBAL OUTLOOK REPORT | Jan 2021 www.institutionalassetmanager.co.uk | 4 STATE OF THE MARKET How has the asset management industry emerged from the market volatility and pandemic of 2020? NICOLAS FALLER Co-CEO of Asset Management, UBP Overall, the global asset management industry managed the crisis well. This is reflected by the fact that we saw very few companies experiencing real liquidity problems. It seems that lessons from 2008 were learned. At the same time, and thanks to the strong market rebound in general, the asset management industry is performing effectively. However, in line with the last 10 years, we have seen a huge concentration in flows and some companies are doing much better than others. ANTHONY CARTER Fixed Income & Multi-Asset Portfolio Manager, Sarasin & Partners Many managers will have had a very tough Q1, but thanks to fiscal and above all mon- etary easing many will have seen in a material recovery in performance, especially in November with the passage of US electoral uncertainty and above all the successful development of Covid-19 vaccines. Consequently, a lot of managers will, after a fairly traumatic start to the year, in fact be able to show pretty good performance after fees for the year, boding well for asset gathering in 2021. The transition to remote working has JAN ERIK SAUGESTAD also been effected without much disruption. CEO, Storebrand Asset Management Given that the financial markets recovered so strongly, the overall business is ERIC VANRAES doing well compared to many other industries. Everyone in the industry had Fixed Income Portfolio Manager, Eric Sturdza Investments the chance to stress test its organisation and overall passed. The most volatile Stronger but fragile at the same time due to central banks’ monetary period during Q1 challenged organisations and processes, particularly within FX policies and government stimuli. A huge debt will need to be repaid. and Fixed Income, but since then the liquidity in the market has been strong and resulted in plenty of good opportunities for return generation within several asset EWOUT VAN SCHAICK & IWAN BROUWER classes. Head of Multi-Asset; Senior Client Portfolio Manager Multi-Asset, NN Investment Partners In the area of sustainable investments, the opportunities and risk appetite In our view, the asset management industry performed well during the crisis. Asset man- has been significant, which you can clearly see from the number of IPOs in this agers, often seen as laggards with implementing technology and innovation throughout space. Returns have also been generated by strategies with preference for green the business, successfully turned digital nearly overnight. Many portfolio managers and investments. traders are working from home since mid-March with very few hiccups. Going forward, The pandemic and the volatile markets have shown the strengths in being a based on what we have learned during the pandemic, working from home might, to “one stop shop”, providing clients with different types of funds and asset classes some extent, remain the general approach. Further, clients may become more soft-touch. allowing them to quickly reallocate assets when needed. Existing trends in the asset management industry, like responsible investing and the use of new alternative data sources, have been enforced by the pandemic because these trends have once again proven to be robust in 2020. INSTITUTIONAL ASSET MANAGER GLOBAL OUTLOOK REPORT | Jan 2021 www.institutionalassetmanager.co.uk | 5 STATE OF THE MARKET DEB CLARKE JAI JACOB BELTRÁN PARAGES Global Head of Investment Research, Mercer Managing Director & Portfolio Manager in Multi- CEO, Azvalor The asset management industry had already been Asset, Lazard Asset Management What drives the industry is the long-term trend, reinventing itself before the pandemic – recognis- At the core of the industry’s conceptualisation and this trend remains very strong for our indus- ing the need to provide more outcome-orientated between risk and return is a belief that higher vola- try. A world with the highest amount of money solutions, address a declining fee background and tility accompanies lower returns. I think this holds ever in history and the lowest yields across a remain relevant in a world that was focusing on long term, but it certainly did not hold in 2020. I do large number of asset classes (most of them at broader sustainability factors. This was accelerated believe the pandemic has triggered long-delayed their all-time highs/peak) needs professionals by the pandemic and the asset management indus- conversations about the industry’s relationship and very specialised managers, more than ever. try had to adapt to a new way of working, which to real estate and travel. And I think the industry Specialisation and skills are the two names of the they have done remarkably well. This should be is coming to grips with the idea that providing game, together with skin in the game (avoiding the a pivotal moment in the industry as they look to traditional beta sources in public markets will agency risk is crucial). rebuild better and put sustainability at the heart of need supplementing with alternative factors — be The pandemic has represented a dent in all of that rebuild. Consideration of climate change and they fundamental or quantitative — as part of the our lives. Still, the virus and its effects will fade, diversity and inclusion, both at the firm level and accelerated re-categorisation of assets into more and the industry will again be re-exposed to the in investment strategies will be key going forward purposed, meaningful buckets. long-term trend: low yield world, vast amounts of as will building a strong culture focused on all idle money on one side and monster liabilities/debt stakeholders.
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