This Opinion piece is by Brian Slattery, SVP Northern Europe, Clearwater Analytics and it looks at the variety of new investment opportunities available to insurance fund managers, pension fund managers and more.
Nobody wants to stand in their parent’s shadow for life – whilst they give you the platform to succeed, there comes a time where everyone starts to crave more independence. The asset management arms of insurers are no different – they no longer want to be restricted to only managing the money of their parent company, and as such are on the hunt to increase their AUM in 2023. In the task to manage a greater amount of capital, they’re now looking further afield – towards external institutional asset owners for additional funding.
It is clear that we are operating in an environment of rising interest rates, tightening global central bank policies, and market depression in traditional assets such as listed equities. As such, the attraction of long-term, steady investing strategies, is clear. Asset managers that have demonstrable track records executing large insurance mandates are therefore in a strong position to grow.
However, if Europe’s insurance specialist asset managers are to successfully broaden their horizons and manage external capital, they must address a host of operational challenges that stand in their way. For a start, institutional appetites have come a long way – with many now incorporating private market assets into their portfolios. On top of this, in a globalised financial system, these asset managers could be courting business from institutional asset owners across a range of different regions. If you are able to offer the speedy onboarding of assets, which is reliant on being able to aggregate a significant amount of data into one uniform model that is not tied down by geographic or asset-type constraints, you are at an advantage in the race for new business.
This is where the benefit of data agnostic, cloud-based systems is really felt – as they significantly cut down the amount of time that it takes to transfer institutional investor’s assets across to the selected asset manager. On top of this, there is simply less manual leg-work necessary.
A further consideration for insurance asset managers who are seeking to grow their AUM is the vast and ever-increasing amount of information that is being demanded by clients. This constitutes not only the financial performance of their portfolios, but additional factors such as how they rate against ESG scores. Firms therefore need to be able to ensure that their data management infrastructures are fully interoperable with their reporting frameworks, in order to guarantee that data is of the highest possible quality when being inputted into regular client reports, as well as ensuring that the reports are able to capture a more holistic overview of the portfolio. It can therefore be considered essential that asset managers are able to effectively deliver static reports such as fund factsheets, along with more dynamic, real-time reporting to satisfy demand.
On top of this, with regulations diverging more across jurisdictions, as is being seen between the UK and EU, the strains on both watching regulatory changes and accounting for asset managers in reporting are multiplying. When dealing with separate processes that lean on siloed systems, things take twice as long – reinforcing the benefits brought through fluid interoperability between middle and back-office processes.
It’s a competitive marketplace, but there a lot of institutional investors who have not had the chance to deploy their capital over the last year due to the negative and uncertain market conditions. Many are considering outsourcing their investment mandates to specialist asset managers, and insurance asset managers are in a unique position to be able to capitalise on this need, being able to rely on established track records of delivering on long-term, low-risk investing strategies for significantly large portfolios of their parent companies.
2023 presents a great chance for these firms to grow their AUMs and step out of their parent company’s shadow – as long as they have the operational infrastructure to support this growth and attract the external investment. This is why a focus on the real value adds such as top-notch client reporting, and best-in-class data management architectures could be the difference when it comes to RFP stage in 2023.