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Efficiency, Cost Control Top Buy-Side Priorities

Greater efficiency and controlling costs are top priorities for asset managers and influencing outsourcing trends, according to a new white paper – the Next Chapter in Driving Growth in Asset Management – from Northern Trust.

The paper, which canvassed 300 firms across the asset management industry, found that for 50%, increasing efficiency over the next two years was a key strategic driver while 47% pointed to cost control with 45% looking at enhancing quality and accuracy.

The paper found that while asset managers were grappling with many of the same issues as in 2020 when the last survey was conducted, the post pandemic hybrid model has had an impact.

It helps explain why 60% said the work environment has increased their likelihood to outsource while 52% are increasing outsourcing due to the cost of maintaining in-house capabilities. A further 51% said itwas due to staffing challenges.

There was also a view that outsourced providers can boost technological and governance capabilities.

For example, technology limitations  and cybersecurity concerns were important factors driving a potential move to outsourcing for 38% and 44% of respondents.

n terms of services and products, data management was  seen as having the most potential for outsourcing, with nearly half or 48% considering the option in the next two years.

Approximately one-third are considering outsourcing foreign exchange, securities finance and middle office functions, and one in 10 say that supporting growth in crypto/digital assets is a priority, according to the survey

Managers are concerned that they will lose their competitive edge if they do not have the right data in the correct formats. “They may struggle to identify investment opportunities, meet reporting requirements, and grow their businesses,” it said.

“As we are coming out of a two-year pandemic in which operating models were strained or challenged, there has been a renewed focus on efficiency, and how talent and technology can enable that,” said Ryan Burns, head of global fund services for North America at Northern Trust.

He added, “The most successful asset managers are leveraging new technologies and operational approaches, while also seizing the benefits of outsourcing, to enable more efficient and effective decision-making.”

Caroline Higgins, head of Hong Kong, Macau and Taiwan at Northern Trust.

Caroline Higgins, head of Hong Kong, Macau and Taiwan at Northern Trust, said, “There are many challenges facing managers – employee turnover, staff returning to offices, managing costs. With so many questions to be answered, the way forward is to look at all of these in a holistic manner covering people, technology, services and regulations.

This article first appeared on Best Execution, a Markets Media Europe publication.