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IPE special report May 2018

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Fund management industry ‘still immature’

GLOBAL – The asset management community must come to terms with the emotional and psychological aspects that come with the strategic changes it is undergoing, according to a think tank.

The fund management industry is like a 15-year-old teenager, who is physically well grown but still emotionally immature, professor Amin Rajan, chief executive of the Centre for Research in Employment and Technology in Europe told a conference.

Raja told a conference organised by the Institute of Economic Affairs that fund managers are going though a transitional period. They have to adjust to a shift from “new products with unclear value propositions, a phase popular in the 1990s, to business efficiency, risk and regulation”.

The transition is likely to take time and patience, he said, stressing that managers must get through the changes and avoid “the boiling frog syndrome” – referring to the dangers involved in rapid change.

“Everybody is expecting quick results, following the changes that they have made. In this business there are no quick fixes, it is a hard graft and you have to persist,” he told IPE on the sidelines.

Among the problems affecting the changing fund management industry is the lack of culture of strategic thinking, personal accountability as well as an “entitlement mindset”.

“There is still a strong entitlement mindset, people expect to be paid bonuses irrespective of performance, even today. People also feel that when they come up with new ideas, they have to be adopted,” he told IPE.

“There is a very strong culture of excessive individualism -more teamwork and more debating are_needed,” he said. But he also stressed that discussions must feature in a change “design” stage, rather than implementation, when queries are out of place.

Rajan also observed that some fund managers have fostered a “UN security council culture” which implied “getting everybody to agree on everything, before anything gets started”.

Sometimes problems lay with the implementation of a change itself as some managers base the change on their old approach, he continued.

“That fails to recognise the importance of passion and persistence. People think a change is a destination, not a journey.”

The industry will need at least five years time to achieve emotional maturity, Rajan forecasted.

“In the light of changes that are taking place now, it is acquiring maturity, but that takes a while,” he said.

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