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Embracing NextGen Invest and Risk Tech (Asset Manager Edition)

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30 October 2019

Navigating A Hypercompetitive Digital Landscape

Key research questions

  • What does a fit-for-purpose investment IT architecture look like, and how does it enable innovation?
  • How should firms best capitalize on nextgen approaches & modernize legacy systems?
  • What steps and tactical guidelines can firms adopt to mobilize efforts and sidestep execution risks?

Abstract

Hypercompetitive conditions in recent years have served as a reality check and a galvanizing catalyst for investment firms to address fundamental issues, especially around the contraction of margins, as well as the business case to respond to structural changes that are reshaping the industry. As investment managers seek bases of differentiation and alpha, there are three sources where this can be derived: getting better information, processing it faster, or processing it more intelligently.

Celent believes that the industry is at an inflection point. Next generation technologies and fintech innovation are changing the investment value chain, and new propositions are offering access to better, cheaper investment solutions. Although the fintech hype has lessened, appetite for new levels of automation and digitization continues to grow among investment managers. We anticipate that digital approaches and data science techniques will enable investment managers to create impact for their firms around interactions (better workflow and information harmonization); facilitate a more agile approach around investment optimization; and construct more timely and accurate predictive models and forecasts.

In order to avoid playing catchup, firms must find ways to re-tune the old and embrace the new simultaneously. In the near-term, firms need to adopt a pragmatic approach to evolve their technology where it makes sense to do so, and leverage their legacy assets where it does not. In formulating the answer to these questions, business and technology teams must collaborate to frame and evaluate what constitutes the most compelling digitally-enabled capabilities and use cases to pilot (and to eventually implement and scale out); at the same time, taking into consideration how to bring the best out of “old and new tech” without large wholesale replacements. This is a significant undertaking – is there sufficient buy-in for innovation and change? More importantly, to what degree are senior leaders clear about where digital can add competitive value to the business?