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Asset Management / Wealth Management
Asset managers show increased appetite for M&As
ESG investments seen taking at least three years to provide returns
The Asset 6 Feb 2024

Notwithstanding the challenging market environment over the past year, the Asia-Pacific region is experiencing increased demand for asset management platforms and appetite for mergers and acquisitions, a new report finds.

Asset managers are generally still optimistic about the sector’s prospects, with 76% of respondents confident of growth in the industry, and 73% having confidence in their own company’s growth prospects, according to the latest KPMG Asset Management CEO Outlook.

The report was based on a survey of 80 asset management leaders of organizations with revenues of at least US$500 million based in Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, the United Kingdom and the United States.

Most of the chief executives (89%) in the survey expect their organizations to report growth over the next three years, almost unchanged from 90% in 2022.

Andrew Weir, global chair of asset management at KPMG International, says: “Many asset management CEOs worldwide have faced significant uncertainties over the past year. Interest rates have risen sharply, resulting in a more challenging investment environment. Notwithstanding this, there is no shortage of capital, liquidity and flows into asset management. The changing political landscape and the nature of globalization present challenges and also opportunities. It is about the importance of resilience and agility in uncertain times.”

Political uncertainty shoots up to the top of asset management CEOs’ list of perceived threats with 16% mentioning it, up from 4% in 2022.

One of the biggest shifts in CEO sentiment is the increasing interest in mergers and acquisitions, with 58% saying they have a high appetite and those with low appetite declining from 17% last year to 6% in 2023.

Fight for talent

Attracting and retaining talent has risen to the top of asset management leaders’ operational priorities, with 26% of respondents mentioning it in 2023 compared with 17% in 2022. The sector still struggles with gender balance with women making up just 11% of the 80 CEOs in the latest research.

Meanwhile, there is an increasing recognition of the power of capital to make a difference and improve both the environment and society. While ESG has often involved filtering out investments, it can also mean positive choices, such as financing energy transition projects, the report says.

Most asset management CEOs expect to see environmental, social and governance (ESG) investments taking at least three years to provide returns. Net-zero greenhouse gas emissions are their most mentioned specific priority.

The majority of the CEOs say they are willing to take a political or social stand on a contentious issue and divest a profitable but reputation-damaging part of the business.

Focus on digitization

Asset management CEOs put advancing digitization and connectivity at the top of their list of operational priorities in 2022 but it has fallen to joint third in 2023. Cybercrime and cyber insecurity, meanwhile, have moved to the top of the list of concerns that could negatively impact organizational prosperity over the next three years, with 81% of respondents seeing this as a pressing issue and 28% saying that their organization is under-prepared for an attack.

Technology has allowed many staff to work remotely, but the research shows that most CEOs in the sector believe that employees should come to the office and are likely to be rewarded if they do so, such as with promotions or salary increases. Only 10% expect the working environment for traditional office-based roles to become fully remote over the next three years, with 49% expecting work to be carried out in offices.

Generative AI (artificial intelligence) is seen as a top investment priority by 69% of asset management CEOs in the survey, following the high-profile launches of services that generate text and images based on user requests. However, lack of regulation was mentioned by 51% of respondents as being highly challenging for generative AI, with 75% agreeing with the idea that regulations should mirror those for climate change commitments.

Tugay Yilmaz
Tugay Yilmaz
senior investment officer - digital infrastructure & telecom, APAC
International Finance Corporation
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