Outsourcing of investment operations will increase as investment managers look to reduce costs and improved efficiency, particularly for front office functions, according to new research by investment consultancy firm Investit.
Of the top 400 asset managers globally, only 23% outsource investment operations; however, this market area has experienced stable growth over the last 12 years, which continues today.
Trade execution and active currency management are specific areas managers will look to outsource as operating costs and concerns over keeping pace with regulatory change grow.
These challenges at a time when revenues are down and profits are low are forcing investment managers, particularly those who have already outsourced their back office, to consider new innovative services offered by asset servicers who are looking to extend their existing relationships with managers far beyond the traditional custody activities.
The report also shows that while outsourcing increases, mid-size investment managers could employ 16% fewer staff in operations, technology and support functions.
Each firm will draw their own ‘value-add’ line which defines which services they are more likely to adopt in the next two years and which ones they see as key to retain. For most firms, however, the question is moving from ‘why outsource a given function’, to ‘why not outsource it’.
Investment managers are increasingly look to outsourcing in order to focus on their core business functions, like developing new products, growing assets and providing quality service to retain clients.