Recently the Financial Times published a “warning” from Fidelity International boss Anne Richards. She cautioned that the asset management industry may struggle to provide enough capital to address the solvency challenges faced by public businesses as global economies continue to evolve.
Richards, whose investment company oversees £305bn in client assets, highlighted that many businesses would need capital injections to offset the high levels of debt they’ve accumulated. This financial burden has left entire industries struggling to operate efficiently. While some of these recapitalisations will likely come from investment funds like Fidelity, Richards also suggested that retail shareholders could be tapped for capital.
As the industry adjusts to this new landscape, its ability to stabilise and innovate has never been more critical. There is a growing recognition that the recovery will demand more significant changes from market participants.
Designing for Capital Growth
In the past, success in asset management was relatively straightforward—aligning sources of structural wealth creation and growing retirement and liability needs with capital appreciation, income, and yield. However, the cumulative effects of fee pressure, a shift towards passive investments, and concentrated success in gathering assets are pushing firms to take bolder actions to find growth, operate efficiently, and engage customers.
We believe that many investment managers will now venture beyond their traditional boundaries. Some will extend their footprint into specialist private market strategies, while others may focus on actively managed products, becoming increasingly selective in their areas of expertise.
The bottom line is that in the next two to three years, the solutions offered by asset managers and private banks will likely look substantially different from how they appear today.
Many investment managers are crossing traditional industry boundaries to develop new products and reimagine existing ones. This shift is evident across various product categories, from mutual funds and ETFs to alternative investments. These new approaches resonate more closely with investor goals and emotions, moving beyond traditional metrics like market capitalisation, growth or value orientation, and geographic region.
Winning in the New Landscape
Success in this evolving landscape requires more than just new packaging or catchy marketing slogans. Leading firms will need to resonate culturally and deliver through newly developed channels, building appeal to new investor segments—whether geographically, demographically, or both.
Firms that adopt this approach will likely have exceptional insights into their customers’ evolving needs and circumstances. They will also need the ability to develop new products tailored to take advantage of both regulatory-driven changes and emerging market opportunities.
Structuring as a Competitive Advantage
While performance remains a crucial factor for investors choosing a manager, the ease of accessing and tracking investments is increasingly important. As a result, distribution is becoming as critical to a manager's success as performance itself and must be approached with renewed focus.
Many asset managers recognise that traditional fund structures are often neither suitable nor efficient due to various limitations, including high setup costs, regulatory restrictions, and narrow distribution access.
An alternative that addresses these limitations and has gained popularity in Switzerland over the last decade is the Actively Managed Certificate (AMC).
The Rise of Actively Managed Certificates (AMCs)
“While structured products account for only 1% of the $700tn derivatives market, structured products still outsize the total ETF market ($5.3tn) and more than double the total hedge fund market ($2.9tn).” – Bloomberg Professional Service
AMCs are not newcomers to the structured products market but have seen strong growth in recent years. Unlike traditional funds, AMCs can be set up within weeks, with minimal issue costs for the asset manager, offering ongoing cost advantages due to their efficient administration. Additionally, these certificates are issued with an ISIN number, making them transferable securities that can be booked at various custodians.
The growing popularity of AMCs is also driven by the range of assets they can incorporate. Exchange-traded funds and strategy indices, for example, are increasingly included in these products. More sophisticated investors are even structuring hybrid products that bridge asset classes, such as private equity and securitized investments.
Among the expanding range of underlying components are green investments, known as Environment, Social, and Governance (ESG) securities. These are among the fastest-growing asset classes today, appealing not only to retail investors who want to align their investments with their eco-friendly values but also to institutional investors capitalizing on the growing corporate awareness of climate change and pollution risks.
The Role of Technology in AMC Growth
Like other areas of finance, AMCs are benefiting from technological advancements. Banks and traders have traditionally been slow to adopt these securities due to the complex calculations and modelling required. However, the advent of new technologies for contract representation, lifecycle management, and pricing techniques has provided the tools and processing power to structure even the most complex products.
If your firm is considering adding alternative products and strategies to its offering, we would be happy to demonstrate our structuring capabilities, experience, and expertise in financial product distribution.
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