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Study sees polarisation in asset management

GLOBAL – Mid-sized investment managers are facing increased polarisation between niche firms and larger investment houses, according to new research.

Those in the middle are struggling to survive in an already crowded marketplace, says the Bank of New York.

A global report commissioned by the bank entitled ‘Survival of the Fittest: Future Leaders in Investment Management’, has revealed that investment managers need to find more effective means of differentiating themselves if they want to grow and prosper in the industry.

According to Bank of New York managing director Daron Pearce, medium sized investment firms were struggling to identify their niche in the industry.

“There will always be mid-sized investment managers as they decide to go from large to niche or from niche to large. However, the main issue faced by medium sized management firms is how to survive while they are there.”

This sentiment was reflected in the ‘Product Strategy’ section of the report. Approximately 43% of larger investment managers believed a broad product range would become a more successful strategy than niche offerings. About 45% of small firms disagreed and opted for the niche option.

However the medium sized managers were evenly split between those who supported broader product strategy and those that supported niche offerings.

“The problem is that many mid-sized managers don’t quite know where they belong or where to market themselves,” said Pearce.

This makes them susceptible as acquisition targets.

The research report – conducted during late summer this year - was based on 63 in-depth interviews with senior executives at investment management firms and consultancies in the US, Europe and Asia.

“We asked them to identify three out of ten key areas that were the most critical for success. We also questioned them on each criteria and this added value to the findings,” said Pearce.

According to results, performance and effective people management are regarded as key driving factors for growth, but more is needed if investment managers want to stay ahead of the pack.

The Bank of New York concluded that the crowded market will see more fragmentation between distribution and manufacturing, and increased competition by front offices for high flyers and star performers.

Investment managers are also more likely to turn towards more branding and marketing in a bid to gain increased recognition by trustees at beauty parades.

“Investec Asset Management has advertised heavily, emphasised their image, and has become a recognised brand above others in the marketplace. We are likely to see more of this in the future,” said Pearce.

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