Building sustainable success in today’s asset management space requires balancing internal investment capabilities and external partnerships. Organizations must weigh the cost implications of each approach while ensuring they preserve quality, agility, and a robust firm culture.
Matthew Stiling, Senior Operational Due Diligence Analyst at Investcorp-Tages brings unique insights from both operational and allocation perspectives. His hands-on experience, spanning hedge fund accounting to orchestrating operational due diligence (ODD) at scale, reveals how internal teams and external managers can complement each other.
Why does it matter? Firms face rising costs, stringent regulations, and high talent turnover, making refining their strategies more critical than ever. Leaders can spot emerging risks before they derail a business by uncovering how specialized approaches drive growth and harness real-time data. Let’s explore how these concepts translate into measurable benefits.
Balancing Internal and External Investment Management for Greater Control and Diversification
Some investment firms operate a dual approach, blending the benefits of both internal and external manager teams. By bringing select teams in-house, firms establish dedicated internal managers who operate exclusively for their investors, managing capital with direct oversight and alignment with strategic objectives. Via a different business unit and at the same time, they continue to allocate capital to a carefully curated group of external managers, leveraging their niche expertise, diversification benefits, and distinct investment approaches. This balanced model ensures both operational efficiency and breadth of market coverage.
The internal teams benefit from the firm’s infrastructure, compliance oversight, and economies of scale. This controlled environment enables greater real-time data flow, direct risk management oversight, and cultural alignment, all of which contribute to stability and performance.
Meanwhile, external managers introduce varied strategies and market specializations, offering diversification and access to unique investment opportunities that may be harder to replicate internally.
Regardless of structure, both internal and external teams are subject to the same rigorous operational due diligence (ODD) standards, ensuring transparency, risk management, and adherence to best practices. This integrated approach allows firms to exercise greater control over investments while maintaining the flexibility to explore new opportunities across the evolving investment landscape.
Building Trust with External Managers
High transparency around performance and regulatory challenges is vital for forging reliable partnerships with external managers. As Matthew explains,
“We’re a relationship-based business,”
highlighting how trust fosters more open exchanges and a better grasp of each manager’s approach.
The key is ongoing dialogue - whether monthly check-ins or responsive communication.
“We want to trust, but verify,”
Matthew underlines the importance of thorough operational checks to ensure external managers remain aligned with overarching objectives. Blended strategies can yield better outcomes if firms look beyond simple due diligence forms to understand managers' motivations and culture. With consistent trust-building efforts, external partnerships expand an organization’s capacity to exploit niche opportunities, protect capital during market volatility, and secure an edge in specialized asset classes.
Leadership’s Focus on Culture
Beyond cost controls, culture emerges as an anchor for success. The pandemic, with all its disruptions, has underscored the value of cohesive collaboration and mutual growth. “Firms are requiring a better culture that feeds into staff retention,” says Matthew, illustrating how an inclusive environment prevents talent loss - one of the biggest threats to institutional knowledge and performance stability.
When leaders prioritize maintaining transparency, autonomy, and trust across teams, they pave the way for better results. Investments flourish or fade partly based on the individuals executing them, so building supportive ecosystems remains paramount. On an internal platform, this culture is deeply ingrained; externally, it evolves through trust and repeated success. In both cases, leadership’s role is to reinforce a sense of collective responsibility. By doing so, organizations can fine-tune their operational processes, manage liquidity more effectively, and develop sustainable strategies that won’t lose steam each time star performers exit.
Striking the Right Balance for Long-Term Success
Asset managers navigating today’s heightened cost pressures, compliance regimes, and talent churn can find balance by combining internal platforms with strategic external allocations. Real-time insights, scaled infrastructure, and a cohesive culture define the advantages of in-house capabilities. Meanwhile, external partnerships deliver specialized knowledge, alternative viewpoints, and expanded liquidity options. That synergy doesn’t just minimize risk; it also fuels competitive performance.
Some of the most forward-thinking organizations craft a flexible framework that embraces both internal and external managers. They’ll master the equilibrium between trust and verification, autonomy and collaboration - ensuring that each choice bolsters stability and growth in an ever-evolving financial landscape.