By Colt Younger, Senior Vice President, Product

Industrywide, investment management firms are starting to pull back on risky or discretionary spending. Many are also starting to tap the brakes on hiring, with plans to even keep some open roles unfilled.

A lot of institutions today consider investments in modernizing technology as an essential spend to remain competitive.

The global pandemic forced companies into a new way of working, which has influenced asset managers’ views about hiring plans and outsourcing.

After two arduous years in which operating models were strained or challenged, there has been a renewed focus on efficiency, and how talent and technology can enable that.

Hiring Pace Slows Down

Amid tumultuous markets, high inflation, and a tightening labor market, some firms are managing expenses by reexamining or even pivoting away from their hiring plans. With concerns about current volatility and uncertainty, slowing down hiring is an immediate way to ease expenses and reevaluate overall spending and investments in longer-term priorities.

Some firms publicly stated that they are slowing hiring, while others are examining or limiting hiring in certain areas and seeking strategic approaches as to which positions they fill.

This disciplined approach to expense growth is to ensure adequate investment in critical, high-impact areas. Few are more critical and high impact than the technology area, where managers have struggled to find personnel with enough of the required skill sets to fill these positions.

As companies figure out ways to work with fewer people, they’ll lean in more to technology automation and other operational solutions to digitize their workforces instead.

Industry Outsourcing Trends

As we previously discussed in a recent blog, outsourcing, particularly of functions related to data, technology, and regulatory reporting is becoming more popular across the investment management industry.

The increase in regulatory requirements is prompting an increasing number of enterprises to consider outsourcing part or all their reporting responsibilities. Because of this extra work, the industry’s decision-makers are more open to bringing in external partners than ever before, especially to build or update accounting and reporting systems.

Another key factor driving this trend is recognition of the value of external expertise in developing solutions to ease reporting challenges or simply to provide on-the-ground knowledge across markets and sectors.

This outsourcing provides firms with the benefits of scalability at a fraction of the cost of doing it internally. Rather than hiring additional people to perform non-revenue generating operational functions, firms can leverage the deep pool of expertise at external vendors.

Investors are increasingly requiring customized portfolio statements and direct access to data. Whilst in the past, fund accounting may have been managed in Excel, today, it’s all based around complex data management, run on specialist fund administration software. Modern fund administration platforms allow data of fund structures to be tracked at each level, from the original fund through all the underlying portfolio companies.

Financial service companies can enjoy the benefit of using these systems through the third-party administrators, while saving themselves from the costly investment and time-consuming implementation, training, and maintenance of in-house technology.

Outsourcing Allows for Competitive Edge

As an investment management organization, it is paramount to explore the latest data and technology solutions to gain a full understanding which one is best placed to achieve operational excellence and acquire a competitive edge.

To grapple with emerging trends, technologies and products, the industry should anticipate more innovative automation and be prepared to efficiently employ it.

The trend towards outsourcing will only continue to accelerate. More and more firms will look to outsource as regulations intensify, operating costs rise, and investing grows more complex.