SimCorp StrategyLab white papers: only transparency can re-establish market confidence

Three new SimCorp StrategyLab white papers provide guidance on how the global investment management industry can move beyond ‘business as usual’ in order to rebuild trust in the industry and re-establish growth.

SimCorp StrategyLab, an independent research institution sponsored by SimCorp, has released three white papers discussing challenges and opportunities in the global investment management industry. The papers each cover the three major investment management sectors: investment funds, asset management, and pension and insurance funds, respectively. They look at the current state of knowledge within the major sectors of the industry, globally, and point the way forward from a management-strategy and public-policy perspective.

The conclusion across all three white papers is that rebuilding trust is the biggest challenge facing the global investment management industry today and this can only be achieved by means of better transparency.

“The opportunity for growth lies with those industry players that are most able to meet the challenge of providing transparency to their clients and other stakeholders, not least the regulators,” said professor Ingo Walter, director of SimCorp StrategyLab. “It is key for investment managers to embrace transparency at all levels, in terms of really understanding and comprehending own cost structures and the need to increase transparency in business processes and products for sale.” Professor Walter presented the white paper conclusions at SimCorp’s international client conference in Stockholm last week.

The papers have been produced following SimCorp StrategyLab’s continued quest to provide insight into some of the many challenges currently facing professional investment managers throughout the world. Three research teams  were established in spring 2011 to focus on the issues of risk, cost and growth in relation to the three individual sectors. Each sector is led by pre-eminent academics in their respective fields: for investment funds: Professor Martin M. Gruber of Stern School of Business, NYU; for asset management: Professor Stephen J. Brown of Stern School of Business, NYU; and for pension and insurance funds: Professor Massimo Massa of INSEAD. Each designated sector-leader has been teamed-up with other distinguished European academics conducting research in the area as well as industry specialists in charge of examining these major industry sectors.

Another of the significant points made by all three papers is that the right choice of investment management software system is a key determinant in controlling risk of both market and regulatory nature, curbing costs whether in the IT or operational sphere and spurring growth in terms of both product and business.

Peter L. Ravn, CEO at SimCorp comments: “More than ever, in order to drive business performance and regain the market’s confidence, the industry is focusing attention on IT infrastructure as a significant driver. As a provider of investment management software, we know that our solution forms the basis for our clients’ business and we take this responsibility very seriously.”

The three white papers cover comprehensive analysis of 12 key challenges identified and detail the implications of these for each industry.

Among other findings are:

  • Growing competition from low-cost providers is a risk
  • The ability to manage risk, cost and growth remains core
  • Changing demographics will alter funding patterns
  • Greater market volatility, increased financial instability and more regulatory change are anticipated
  • Scale, internationalisation and the right investment management system are key determinants