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Issue #8
A weekly newsletter dedicated to reimagining investment management.
Scott Treloar — Founder of Noviscient
April 18, 2024
Sixteen per cent of existing asset and wealth managers will go out of business or be bought up by bigger groups by 2027...
Let's talk about asset management.
By rigorously avoiding investment in technology, the asset management industry has built for itself a high fixed-cost base. This means whenever AUM drops, say through a general market price decline, revenues drop, and these firms come under existential pressure.
“The global survey also found that almost three-quarters of asset managers are considering acquiring or merging with a competitor as business models come under pressure in a tough market environment.”
Predictably, the response is to get bigger, which they think will somehow help. Unfortunately, there are only diseconomies of scale once you are already managing hundreds of billions in AUM.
But wait...
"...90 per cent of managers believe that disruptive technologies such as generative AI and the blockchain will boost returns and attract young investors..."
Ummmm... no. Generative AI will not help these giant entities with their vintage technology and last-century mindsets.
Anyway, enough of the dinosaurs. The future will belong to technology-capable new entrants focused on creating value for their customers using scalable technology platforms.