In its 2024 Global Asset Management report, Boston Consulting Group (BCG) notes that assets under management (AUM) in the global asset management industry increased 12 percent in 2023. After a 9 percent drop in AUM in 2022, that growth was welcome news.
Despite the rise in AUM, BCG reports that revenue at investment firms is being squeezed by multiple forces. Reduced fees, combined with higher costs, led to a decline in profitability relative to AUM growth.
In their fight for profitability, firms have shifted their focus to cutting costs and streamlining operations.
In this blog post, we examine 5 strategies firms use to generate bottom-line savings and achieve operational alpha.
In this challenging market, many firms adopt new strategies and add new asset classes. But if technology can’t keep pace with these changes, a firm risks losing potential gains. A technology assessment can provide insight into how well investment technology is keeping pace with an investment firm’s strategy.
Conducting such an assessment requires a firm to define its vision and analyze how well the functionality, service levels, and record of innovation of its current technology align with that vision.
From there, a firm should determine the actual cost of its investment technology.
While this analysis requires some effort, it is the first and most critical step a firm must take to determine how technology contributes to its overall operational effectiveness and whether the return is worth the investment.
In addition to understanding how much the firm spends on investment technology, chart a path for addressing future technology needs.
Working with a vendor with a robust ecosystem of solutions expands a firm’s access to cost-effective solutions that can tie together workflows across more systems and partners seamlessly.
Technologies characteristic of an investment ecosystem approach, like APIs, enhance communication and collaboration, and the ability to tap into prequalified partners via existing vendors alleviates the need to vet, onboard, and manage numerous new providers as firm needs change.
The simplified operational framework created with an ecosystem approach lets an investment firm keep pace with shifting market conditions while minimizing TCO and creating operational efficiencies.
Moving part or all operations to the cloud can generate cost and efficiency benefits for many firms.
By transitioning to the cloud, firms can often achieve a more cost-effective solution compared to investing in an on-premise infrastructure and managing it in-house. What's more, the rapid deployment times of cloud solutions can mean that firms get their system up and running in a fraction of the time, providing a significant boost to operational efficiency.
After a cloud solution has been deployed, many firms find their operations are more streamlined and can be easily scaled as the needs of their firm change. The remote accessibility of cloud solutions means employees can work from anywhere they have an internet connection – a key benefit for employees who want flexibility in this time of hybrid work.
Investment firms are turning to trade automation technology to increase their trading desks' efficiency.
Using tools such as algo wheels and rules-based order routing, trading desks can automate low-touch orders and refocus traders' efforts on high-impact trades, helping drive trading desk ROI.
These tools not only free up traders’ time to focus on the things that matter most but also enable them to execute more swiftly and effectively, increasing trading desk and downstream efficiency and accuracy.
In their quest for operational efficiencies, more firms are turning to outsourcing.
Outsourcing allows firms to focus on their core competencies and hire external teams to handle non-core tasks more efficiently and at a lower cost, leading to significant operational and financial benefits.
To make the most of a vendor’s outsourcing offering, firms should start by evaluating their in-house technology and operations to identify areas that could be more effectively managed elsewhere.
Managed services, for example, enable firms to increase resources for routine processes without adding headcount, freeing up staff to focus on higher-value projects. Strategic services offer specialized support to meet business challenges and changes without adding headcount.
Managed applications can handle a firm’s infrastructure hosting and management, along with critical services like robust disaster recovery, security protocols, and issue resolution.
As market and operational headwinds fluctuate, firms increasingly rely on technology to stay competitive.
However, technology alone isn’t enough; firms need a trusted partner to help them navigate challenges, optimize operations, and improve their TCO.
For over 35 years, SS&C has been a trusted partner for investment firms globally. Our industry-leading technology, including Eze solutions, delivers robust functionality at a lower cost. With our signature partnership approach and substantial investment in R&D, we help firms achieve their investment and operational goals today and in the future.
Dive Deeper: Download our new eBook, Navigating Investment Industry Economic, Employment, and Operational Headwinds. This comprehensive guide is packed with in-depth insights on how to boost efficiency and optimize costs at your investment firm.