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Emerging technology key to growth for asset owners, managers: survey

Emerging technology is seen as a top enabler of growth for institutional investors over the next five years, according to new research from State Street.

Nearly half of 500 participants (48%) identified blockchain, artificial intelligence and other technological developments as key to driving their organisation’s growth, a dramatic increase from the 18% of respondents who did so in 2017.

This shift in how asset owners planned to adapt to the current market environment reflected concern over their ability to achieve their growth objectives, State Street said, with 68% of respondents saying that it had become harder to do so in the current market environment.

Most industry participants – including 72% of asset owners and 64% of asset managers – were positioning themselves more defensively amid market uncertainty.

The survey – conducted by Longitude Research on behalf of State Street – showed that while institutions had generally improved effectiveness across their operations since the 2017 study, the ability to manage technology risks and extract better insights from data were additional areas for improvement.

The majority of respondents (61%) were still taking an incremental approach to innovation, as opposed to re-engineering their IT systems completely.

In the UK, the survey found that integrating new technologies into existing infrastructure and processes was seen to be the biggest challenge around implementation (62%, versus 45% in the rest of Europe).

As a result, an increase in acquisitions and partnerships could have the potential to reshape the investment management industry, State Street said, with over half (53%) of respondents looking to established technology companies to support the development of emerging technology solutions. DWS and Schroders are among the managers to have invested in specialist fintech companies in recent months.

Regulation and liquidity risk were considered the biggest threats to growth objectives, State Street’s research found. Digital disruption was also a concern, as emerging technology could introduce risk as well as opportunity, the company said.

Liz Nolan, State Street’s chief executive officer for Europe, the Middle East and Africa (EMEA), said: “Our clients face increasing complexity and regulatory expectations, as well as the need to upgrade technology and improve their data management, while carefully managing costs.”

More than 500 industry executives from 20 countries responded to State Street’s survey, including staff in investment, operations and distribution roles representing institutional asset owners, asset managers and insurance companies. Around 40% were from EMEA, with 37% from the Americas and 23% from the Asia Pacific region.

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