European asset managers must react to the shift in power from West to East by becoming more international, increasing staff coverage in high growth areas and adapting their investment process to new capital market conditions, said ratings agency Fitch Ratings,
In a report, the firm said that asset managers in Europe need to adapt products and staffing to new macroeconomic trends.
European asset managers are going to be forced to think beyond their domestic boundaries, mainstream asset classes and traditional fund management practices due to a varying number of factors, namely, the shift of power towards emerging markets, coupled with lower economic growth in the western world, increasing globalisation and the changing scope of banks, with less syndication, market making and propriety trading.
"Fundamental changes that are affecting the global economy and capital markets are imposing adjustments to product development, culture, staffing and decision-making processes at asset managers," says Aymeric Poizot, head of Fitch's Emea fund and asset manager rating group.
Those asset management companies that become more international in their organisation and staffing, and develop a culture of change and innovation with appropriate communication channels and decision-making processes will be best-placed to improve their performance.
Asset managers also need to adapt investment processes to less directional capital markets, volatile liquidity and increasing correlation. Fitch said many asset managers will need to review risk and portfolio diversification assumptions, increase integration between risk management and portfolio management, and create more holistic research capabilities, through cross-asset research or political/geopolitical analysis. Managers must also give greater consideration to behavioural and technical factors, and provide more dynamic asset allocations.
The ratings agency outlines some initiatives by certain managers that are moving in this direction, such as the launch of globally diversified products, the creation of a chief risk officer position or the development of theme-based asset allocation approaches.
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