The finance industry is currently operating in a climate of unprecedented market and economic volatility, and the asset management sector is no exception. Institutional investors are finding it an ever-harder challenge to meet their investment needs. Pension funds and insurance companies are worried about funding their liabilities, which are increasing due to factors such as ageing populations and changing weather patterns. Many sovereign wealth funds are struggling to preserve the value of their investments.
However, the asset management sector has fared better than other parts of the finance world. In general, it's always had the prudent, long-term attitude and client-orientated approach that are both now being held up as gold standards for firms across the finance world. Asset management firms concentrate on managing their clients money on a fiduciary basis for the medium to long term. Their business models are fundamentally different to those of investment banks which conduct their own business as well working on behalf of clients and, because of their transactions and markets focus, tend to operate in a way that's orientated towards the short term. Both of these factors put investment banks at greater risk than asset management firms at times of market volatility.
And asset management firms are well-placed not only to ride out market volatility, but also to seize the significant opportunities it presents. Firms like BlackRock are seeing the current climate as a chance to develop new technology and investment products, and to reshape the industry so that it's well set up for the coming years by working closely with regulators. Furthermore, a retreat from some areas of work by investment banks means asset management firms are getting more closely involved than ever before in the analysis and structuring of investment opportunities.
So while there are potentially great opportunities ahead for graduates in investment banking, asset management is currently an exceptionally exciting sector to go into for those interested in focusing on clients' investment needs and thinking about the future.
Here are what we think are six particularly interesting current prospects for the asset management industry.
Stephen Crocombe, Head of Product Development at BlackRock, is upbeat about the UK's economic prospects. He first argues that the UK's corporate sector, an important source of clients and thus fee revenue for asset management firms operating in the UK, is doing somewhat better than the media tends to report, and certainly better than those of the struggling southern European economies. And he points to the fact that some industries in the UK requiring asset management services, for example, manufacturing, are growing steadily after a period of decline.
Stephen goes on to add that current economic trends mean that the sector's future prospects are good. According to the Investment Management Association (IMA)'s 2010/11 report, assets under management by the industry in the UK are at a record