The asset management industry must create “positive social impact” and become a “force for good” in the coming years, according to a report from consultancy giant PricewaterhouseCoopers (PwC). One of the key areas of change involves the transparency of the industry, as new regulation comes into force.
Asset Management 2020: A Brave New World looks at a number of trends that will shape the future of the industry and how asset managers can give themselves a competitive advantage.
According to the report, global investable assets will increase to more than $100 trillion (£60 trillion) by 2020, with a compound annual growth rate of nearly 6%.
The report says, “Asset managers must both create positive social impact and deliver the clear message that they are a force for good, to investors and policymakers.”
According to the organisation, regulators will turn their attention to asset managers and scrutinise their culture, interactions with customers and effectiveness at implementing regulatory change. This will force managers to change the way they operate and make investments more transparent.
Driven by regulation and increasing interest from investors, all investment activity and products, across all levels, will be fully transparent by 2020 the report says. This need for greater portfolio-level transparency started with European insurers under Solvency II, but will spread to the US and Asia.
The report adds, “Access to portfolio-level data will become the norm as institutional investors including pensions funds, increasingly use portfolio-level data to manage their own risk levels and for reporting to their own home state regulator”
Another trend is a shift in the investor base, because of the government-incentivised shift to individual retirement plans, as well as an increase in high net-worth individuals from emerging populations and a growth of sovereign wealth funds.
These changing demographics, along with regulation hindering banks, will thrust asset management centre-stage, the report says. It concludes, “As the world ages, retirement and healthcare will become critical issues that only asset management can solve.”