GLOBAL - A large majority of asset managers worldwide believe building clients' trust and increasing transparency will be the biggest challenges in the coming years, according to consultant KPMG.
KPMG canvassed senior executives at 17 large asset managers in Europe, the US and Asia Pacific and said most respondents thought focusing on trust and transparency would strengthen the sector, improve investment conditions and increase investors' faith.
The consultant said asset managers were also looking increasingly for ways to comply with regulation while lowering costs and increasing transparency.
Heleen Rietdijk of KPMG Financial Services: "It will become more difficult to generate earnings because legislation aimed at increasing capital requirements will lead to a liquidity shift in the market.
"This will force asset managers to set aside more own funds to cover these liabilities."
Although many asset managers expect increased legislation will hamper necessary product innovation, they do see opportunities for new product and investment strategies, KPMG said.
According to its latest survey, the European Directive on Undertakings for Collective Investments in Transferable Securities (UCITS) is considered to have a great deal of potential for new strategies.
KPMG said many managers also believed increased legislation would lead to a rising number of mergers and acquisitions, as smaller companies sought benefits of scale to cut costs.
The consultant said some managers could dispose of activities to "get rid of an increasing burden of legislation", creating opportunities for market leaders to further strengthen their position.