2020 will go down in history as the year the world saw a fundamental transformation. Change has been so radical in fact, that Oxford Dictionaries struggled to name their usual ‘Word of the Year’. With so many new words and phrases coming out of the pandemic they chose multiple, including ‘Covid-19’, ‘WFH’, ‘lockdown’, and ‘support bubble’.
Asset management has not been immune to extreme change and our $50 trillion industry is very different to what it was a year ago. While 2020 has been the most difficult year in living memory, some positive elements have come out of it, with an astonishing acceleration of digitalisation, generating an evolution of how we work and interact with one another. As we step into 2021 this acceleration will continue and there will be a new world of opportunity.
The new ways in which investments are made and how these services are delivered by asset managers will be a key part of this world. Transparency, speed and fully digital investing are now at the forefront of everyone’s minds. Because of this, we have developed a completely new solution that will help to enable and deliver the new investment model.
During our virtual Connect Forum in December, we introduced our new infrastructure for fund administration, issuance and distribution – DMI Fund Services. Through the creation of a centralised register and full connectivity across the fund chain for all fund participants, we are building the basis for the investment landscape of the future. We discussed DMI Fund Services extensively at the session ‘Challenging the digital status quo – Practical steps to delivering business transformation using new technologies’, where our CTO Adam Belding explored the transformational opportunity it offers and our roadmap for roll out.
Future state
During 2020 we saw tokenisation become a popular topic of discussion as the industry increased its focus on new innovative investment models. The opportunities presented by a move to tokenised assets undoubtedly presents exciting opportunities and we look forward to continuing our work with clients as they take practical steps to making tokenisation a reality.
Beyond tokenisation, there will be a big shift this year as large asset managers exponentially increase their investment in technologies affecting all areas of the distribution chain. We covered some of these new technologies in detail at our Connect Forum session ‘A brave new world: new technologies are speeding up how firms deliver change’.
Bringing automation to money markets
It is not just mutual funds that has seen transformation, we exposed similar issues within the multi-trillion dollar corporate money market funds industry in our white paper from last year. Many of the issues faced by this industry have been similar to other areas of collective investments, namely the risk and cost associated by manual processes, exacerbated by homeworking, as well as a lack of transparency and real-time data. Over 2021, there will be a growing focus on money markets and how these fund types can be more efficient for investors and their fund providers.
The future shape of funds
Last year the world saw an explosion of flows into ESG equity funds, with ESG fund assets in Europe alone now totalling over $1tn[1]. Combined with the increasing focus on climate and governance, spurred on further by Covid, I expect this trend to become even more marked in 2021. In the UK market, we saw ESG equity fund inflows rise an astonishing 10-fold between Q3 2019 and Q3 2020. Now with a Brexit deal in place, ESG fund flows are likely to expand even further in the UK, with much of the uncertainty now removed.
Looking forward to a positive 2021
As the world starts to recover from its massive shock last year, we all look forward to a more positive 2021. With the rollout of new vaccines, the change of government in the US, a Brexit deal that will provide much needed certainty for Europe and the fast growth of asset management in Asia, we can look to the new year with hope. As asset management accelerates its technological transformation and moves towards a more ethically driven and client focussed service model, the future of the investor experience looks to be a bright one.
[1] https://www.morningstar.co.uk/uk/news/206906/esg-funds-assets-hit-%C2%A3800-billion.aspx
