The Little Big Story of Asset Management: Factories and Boutiques Create the Need for IT Upgrades

by Jay Wolstenholme, September 8, 2016
Industry Trends
Global

Abstract

Celent has released a new report titled The Little Big Story of Asset Management. The report was written by Jay Wolstenholme, senior analyst in Celent’s Securities and Investments practice.

 

Macroeconomic factors continue to influence the buy side and asset managers. Low/negative interest rate environment, high-cost operating environment, and increased operational demand from clients and regulators are all exogenous factors forcing the buy side business model to evolve. And only the adaptable, strong and efficient will evolve and survive.

This has fostered the factory/ boutique industry paradigm on the buy side. The factory/ boutique paradigm applies both to the investment side of the business and the vendor side.

The large investment managers grow larger offering across the board investment products, expanding internationally, and expanding into the complete AUM levels of wealth management. Fees can be lowered and services made more efficient due to economies of scale.

In parallel, the larger technology vendors are providing lower-cost front-to-back solutions, continually expanding their client base up and down the AUM levels. This access to abundant and lower-cost asset management technology allows specialty asset management boutiques to flourish. Highly focused investment boutiques can access infrastructure/operations and technology at sustainable cost levels as never before.

Additionally this enables speciality technical analytical shops to focus on specific investment analysis/risk and utilize and connect with core technology through open interfaces, being able to leverage core infrastructure rather than being burdened with having to provide it.

The factory/boutique paradigm has evolved across multiple other industry groups and is currently unfolding across the buy side and financial markets.

“Within the buy side, significant transformation is afoot. The multitude of operational and technical sourcing options readily support the internalization and diverse asset allocations client are demanding up and down the AUM ladder,” comments Wolstenholme. 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Introduction

4

 

Key Research Questions

5

Factories and Boutiques

6

The Evolving Business Model — The Factory/Boutique Industry Effect

8

 

Factory and Boutique Paradigm

8

Factory and Boutique Technology Concerns

11

Conclusion

15

Leveraging Celent’s Expertise

16

 

Support for Financial Institutions

16

 

Support for Vendors

16

Related Celent Research

17

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