Day 1 of the PAICR conference in New York opened with a presentation by Kevin Quirk, Partner at Casey Quirk.
It suggests fundamental changes are altering how asset managers, the world over, do business.
Casey Quirk is a management consultant to investment managers, so well placed to comment on trends. While somewhat US-centric for Australian firms there was plenty of value in Quirk’s comment.
Six key trends will shape institutional asset management in future, he says:
1. Demand for outcomes
2. New investment frameworks
3. Shifting asset allocations
4. Target-date fund growth
5. An emphasis on alignment
6. Globalising clientele
Again this year we heard the plenary speaker talk about the “two camp” split in asset management. Last year it was described as commodity/utility providers versus boutiques or value add. This year it was described as “solution providers” versus “component providers”.
“Solution providers” in the Casey Quirk world, are those who emphasise portfolio constriction; achieve multiple objectives and use more balance-sheet wrappers. “Component providers” are those who emphasise specialist alpha; focus solely on return and provide returns within other packaged products
Other key themes:
- Total portfolio outsourcing is on the rise for institutions globally
- Demand for outcomes will lead to a multi-faceted investment approach (and challenges to conventional thinking such as CAPM & portfolio theory)
- Investors & consultants are re-thinking traditional asset allocation frameworks – expected to mean, among other things, more money going to hedge funds
- Demand is rising for non-correlated alpha and inflation-fighting product sets
- Long-only, US equity-focussed allocations are in decline
- Fixed Income may present opportunities for smaller managers
- Target date fund growth will drive demand for additional asset classes
- Investment management firms with lower staff turnover generally perform better
- Similarly, Quirk’s numbers show better staff alignment results in significantly better revenue growth performance
- Strong alignment has become a critical selection criteria for gatekeepers
Quirk’s 19 slides were each very relevant to Australian investment managers and those who work with them.
Here I’ve only covered about two of the 19 in detail. This presentation alone is worth sharing more in person – and I will be doing so in Sydney and Melbourne before year’s end. Drop me a line if you’re interested in hearing more.