Investment managers are optimistic about their business outlooks, according to a poll of 88 clients of SEI.
“We have a diverse client base, from boutique managers who run a few specialized strategies, to larger firms with $100 billion-plus,” says Phil Masterson, managing director for SEI's investment manager services division. “And consistently, across the board, they were optimistic.”
Investment management executives told SEI, in a survey at a recent event for the company’s clients, that they plan to continue to invest to increase efficiency, reduce risk, and enhance client experience.
Eighty eight percent said they are optimistic about their firms' business prospects over the next three years. Why? Twenty nine percent said positive market expectations; 22% said firm-specific strengths, such as superior performance, and 19% cited their well-respected brands.
On the other hand, 12% of managers expressed concern about their prospects, pointing to weak distribution strategies and insufficient distribution resources. Such firms may be “chasing too many channels” or may not be allotting enough resources to marketing and distribution, says Masterson.
The survey also revealed managers are not complacent. Many firms said they are making investments in the areas of operations, marketing and distribution and client service.
“A lot of firms had been deferring strategic decisions, and now I think that time period has ended,” says Masterson. “We feel we’re in period of stability.”
Indeed, most of the managers polled said they have already taken steps, or have plans to take steps, to improve their growth potential. Eighty four percent cited major personnel or technology investments to enhance client service. The top areas for investment in 2011 cited in the poll include: hiring of additional marketing and distribution personnel (34%), back-office operations and technology (28%) and compliance and regulatory functions (17%).
SEI’s poll also revealed that managers see new regulatory requirements as their top challenge. One in three respondents identified it as the most significant challenge to the industry over the next 12 to 18 months.
Participants were split on the effect of new financial regulation. Half of the respondents said they believe new regulations will have a significant effect on the profitability of their firms, while 41% said they expect an insignificant impact.
New regs could hit alternative managers, who until now have had lower regulatory hurdles than traditional managers, harder, says Masterson.
When it comes to the top channels for growth over the next 12 to 18 months, the lion’s share of managers (46%) pointed to the institutional channel, meaning clients in spaces like defined benefits, endowments and foundations. Registered investment advisers and independent financial advisers were named as having the top distribution potential by 20% of respondents, followed by retirement plans at 18% and sovereign wealth funds at 11%.