Who Wins the Future of Asset Management?
To answer the question, FinTech Collective and Goldman Sachs recently hosted a conference at Goldman’s offices in London. The event brought together 80 CEOs and CIOs from some of the largest asset managers and asset owners in the world, and over a dozen leading startup founders from the U.S., U.K. and Europe.
In the following report, we share key insights from the conference and provide our view on how the industry will continue to evolve. We’ve also mapped out the current investable themes across asset management - highlighting opportunities across infrastructure, product, and distribution:
- Infrastructure: The way data, money, and assets move across the industry is being reinvented. Opportunities for innovation include data infrastructure for the buy-side, risk management software, improved clearing and settlement, and back-office automation.
- Product: Capital is increasingly hunting for yield in new places. As a result, startups are opening access to alternative assets and, in some cases, building net-new data and technology driven asset managers to facilitate this capital.
- Distribution: Traditional distribution models are being challenged in numerous ways in the digital era. As one example, blockchain startups are taking a revolutionary approach by tokenizing assets and securities for the first time.
To unpack the tectonic shifts occurring in asset management, the conference featured six sessions where both incumbents and challengers shared their insights on how the industry will play out in the coming years. These sessions covered the following topics:
- Re-Architecting Legacy Infrastructure
- Re-Thinking the Product Offering & The Post-Fund Future
- Blockchain: From Myth to Production in Institutional Markets
- Digital Assets: Perspectives from A New Asset Class
- The Innovator’s Dilemma
- Incumbents, Enablers, and Insurgents
Given recent macroeconomic uncertainty generated by COVID-19, we believe the transformation of asset management broadly, and the buyside specifically, will accelerate. The approximately 30% drop in markets is becoming comparable to the 2001 collapse (44% drop over 4 years) and the global financial crisis of 2008 (40% drop in 6 months). While the story is still playing out, the impacts are sure to be far-reaching. Businesses reliant on AUM fees will feel even greater pressure, which may increasingly drive them to automate back office processes, upgrade their infrastructure, and re-evaluate the risk management function. With restrictions on travel and social distancing measures, asset managers may increasingly rely on digital channels for distribution and client interaction. And with interest rates at or near all-time lows globally, capital will have to increasingly search for novel places to generate yield (once investors regain comfort with risk).
This “hunt for yield” creates an incredible opportunity for innovative technology startups to open new asset classes to scalable investment - a theme that underpins three of our most recent investments:
- Immo is building the real estate asset manager of the future. The platform functions as an iBuyer for sellers, while also enabling institutions to scalably invest in residential real estate.
- Underline finances intelligent community infrastructure, starting with open-access fiber optic internet. Internet connectivity should not bottleneck smaller cities and towns.
- Antler is a global technology startup builder, and index fund for early-stage innovation.