TODAY, UBS GLOBAL ASSET MANAGEMENT formally released it newest white paper, Evolution of the Asset Manager, which looks at the evolution of the asset manager over time and the changes the asset management industry has seen in response to economic, demographic and industry-specific pressures. UBS Global Asset Management outlines the changing face of asset management; both by dissecting driving factors from the 1990s, highlighting current and potential forthcoming trends and by analyzing the impact of evolutionary pressures.
Authored by Curt Custard, Head of Global Investment Solutions, and Matthew Richards, Strategist, Global Investment Solutions, the piece identifies key trends that aim to help asset managers help their clients set realistic goals and work smarter, in a more innovative capacity, to meet them. Examining how investors are currently driving into bonds similar to the earlier shift into equities unearths behavioural tendencies in a similar fashion to the continued tendency for investors to look to previous year’s performance as an indicator of the future.
However, key differentiating factors outlined in the paper indicate that over time many changes have developed within asset management as it relates to investment content, product categorization, investment teams, client base and distribution teams. Historically product categorization was organized largely by asset class and management style, but through time it has grown more popular to categorize largely by risk return profile, outcome and factor exposure. Similarly, investment content has also developed; finance has gone from being seen as “science” to being seen as adaptive and incorporates behavioral finance. Sample takeaways from the new report include:
- Emphasis is moving away from performance relative to benchmarks and toward investor outcomes such as income generation and avoiding large drawdowns (i.e. peak-to-trough losses.)
- The secular bull run in bonds is approaching its natural limit as government bond yields in the US, Japan, Germany and the UK move closer to zero.
- The assumptions behind the Capital Asset Pricing Model (CAPM) and Modern Portfolio Theory (MPT), two academic models that have been widely used in the investment industry, look increasingly unrealistic.
- The focus is also shifting from specific asset classes to holistic solutions to meet investors’ needs.
- Investors based in emerging markets make up a growing proportion of the industry’s client base and have different characteristics to those based in developed markets.