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TRENDS SHAPING THE INVESTMENT MANAGEMENT INDUSTRY | MUCH MORE THAN A TECHNOLOGY DISRUPTION

NBKCapital latestNews, Strategy Note

Kuwait: February 4, 2020

Multiple trends are shaping the future of the asset management industry. Some are related to long-term changes in the fundamentals of the global economy which have been, at least partially, a consequence of the financial crisis of 2008, while others are related to technological advancements that are disrupting and redefining the dynamics of entire industries.

HIGHLIGHTS

  • The expansionary monetary policies following the financial crisis of 2008 have resulted in what seems to be a prolonged low interest rate environment. This, in addition to a low inflation, low growth environment amid a tighter regulatory framework, is causing a significant change in the dynamics of the asset management industry on a global level.
  • The hunt for yield is pushing investors towards riskier asset classes amplifying the overall risk in the system while passive investing as a low-cost means of gaining market exposure is gaining significant ground against active investing.
  • Technology is playing a key role in accelerating the change. The traditional model of commercial banking is being challenged by more flexible, consumer-centric digital banking models, while Artificial Intelligence is threatening the long-standing aspect of human relations in the wealth management industry.
  • Environmental concerns and sustainability issues have been gaining significant importance over the past few years. These issues are being integrated into the core of the investment management industry after having been considered long-term qualitative factors with no material effect on the investment outcome.

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