Digital transformation, culture and talent are a recipe for success, says Deloitte’s Investment Management Outlook for 2022

As we near the end of what has been another tumultuous year for businesses around the globe, including those in the financial services sector, the recent Investment Management Outlook report for 2022 from Deloitte makes for interesting and positive reading.

Magic combination for investment management success

The first point made is that investment management firms that combine management vision, talent, operational improvements, governance and culture will be more likely to succeed in 2022.
Whilst this sounds straightforward, not all firms have managed to find the perfect mix and haven’t yet achieved the right balance of operational excellence and culture.

DEI and ESG go from strength to strength

Staff and investors alike continue to be motivated by a strong firm culture, so diversity, equality and inclusion (DEI) activity will become even more important. The measurement and quantification of these factors is an important part of the story. Reporting on DEI and ESG activities can be notoriously difficult, but these important metrics, with a wide set of data points have been captured in recent template documents, such as the recently published DDQ from ILPA, which includes a comprehensive section taken straight from the PRI. The questionnaire template, freely available for use by both LPs and GPs has been digitised in the Dasseti system. The template is easily accessible and can be used in its exact state or adapted to meet an investors’ specific needs. Results are ingested, analysed and displayed in a customisable, user friendly dashboard.

AI continues to be important

Deloitte also found that there are strong correlations between firms that use AI and natural language processing and increased alpha generation. The firms themselves saw the benefits of cutting data collection time and instead spending more time analyzing data for insights and new opportunities. 85% of firms surveyed were planning to increase spend on AI and NLPA technologies.

Client communications and collaboration

Technology features again when looking at investment management firms’ client relationships, with more digitally advanced firms expecting slightly better performance than less advanced firms. Tools that can improve collaboration and communication could be the answer. Dasseti has found that allocators are keen to improve communications between themselves and managers, so using technology that allows for frictionless interactions can reap greater rewards.

Assessing alternatives and crypto funds

Despite market volatility, in the alternative investment management space, hedge fund performance was outweighed by private equity, private credit, infrastructure and real estate, and continues to attract capital inflows. Cryptocurrencies are also in abundance and offer an attractive and increasingly popular asset class. When gathering data on these alternative asset classes, it is important that the approach is adapted to allow for the unique traits of each. Private markets are notoriously opaque and it can be difficult to see through the managers to the portfolio companies beyond. We set out some due diligence guidance for LPs to help them ask the right questions when assessing private equity fund managers.

The SBAI has recently published guidance for investors performing ODD on crypto assets. As Crypto assets operate using different infrastructure than traditional asset classes, ODD must take account of the risks that are more prominent within this asset class. The guidance from the SBAI is a useful toolkit for both asset managers and investors, highlighting the specific questions that should or could be asked.

Digital transformation is key

Whether firms are looking at emerging or alternative asset classes, or sticking with traditional investments, the outlook for the sector does look bright and, as a digital platform provider, it is great to see technology and digital transformation underpinning success in every part of the investment management sector.

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