WE have always talked about the downsides of the COVID-19 pandemic and its impact on all sectors of the capital market, worldwide.
In fact, the global socio-economic and business spectrums were literally brought to a halt at the height of the pandemic.
Coincidently and during the same period, the fund investment/asset management community (AMC) was undergoing a transformation – a technological evolution of sorts that involved the creation of advanced operating platforms and practices, thus setting the pace for continued growth and expansion of the industry.
The evolution of the new operational practices was quite timely given the emergence of new business markets. Take, for instance, the recently sanctioned Regional Comprehensive Economic Partnership (RCEP) that involves 15 nations.
According to the ASEAN Secretariat, the partnership is expected to contribute US$25.8 tril, which is about 30% of global gross domestic product (GDP). This is indeed a huge opportunity for the investment/asset management sector.
But are the investment fund or AMCs ready to take advantage of these forthcoming opportunities? Have they adopted new technologies in their operating and business framework to do so?
Besides that, do they possess asset servicing and fund administration capabilities, data analytics for decision-making and digital solutions to offer top-of-the-line service? These back-office support frameworks are critical to their operating systems in that they would free them to focus purely on growing the business and creating value for their clients.
Let’s briefly look at two areas that are key to growth and sustainability:
Evolution of the asset management industry
In 2021, Linedata analysed the global investment management community and published its Global Asset Management Survey report. They concluded that the COVID-19 pandemic has prompted new technological and operational practices to evolve.
It was reported that asset managers are now at various stages of evolvement and are now inclined to establish operational resilience to create long-lasting value for their clients.
Asset managers who are performance-driven are also looking into areas such as cloud computing, environment, social and governance (ESG) integration, transparency, outsourcing, business continuity planning, vendor consolidation, artificial intelligence and machine learning.
In 2019, a majority of the firms surveyed indicated that they had no plans for “cloud computing”. However, by 2021 (post-pandemic), only 5% maintained this position.
When industry trends change and new benchmarks became part of compliance protocols, we too must adopt similar approaches to remain relevant and competitive. This would enable us to be more resilient and focused on tapping the vast opportunities that prevail.
Market upbeat on growth – is the investment/asset management community?
Malaysia has recovered steadily despite facing severe onslaughts from the COVID-19 pandemic.
After two years of poor performance, the country is back on track, recording 5.5% growth in the first quarter of 2022; Bank Negara Malaysia (BNM) has projected 5.3% to 6.3% growth for 2022.
The uptrend in growth, coupled with the Government’s efforts to strengthen the national digital framework through the Malaysia Digital Economy Blueprint as well as its thrust on the 12th Malaysia Plan (RMK-12) and National Trade Blueprint (2021 – 2025), is set to propel the domestic market into new heights.
On the international front, the RCEP is expected to create new avenues for substantial growth.
According to data by the World Bank, the partnership would cover 2.3 billion people – or 30% of the world’s population – and account for US$12.7 tril, over a quarter of global trade in goods and services and 31% of global FDI inflows.
These economic developments would have a positive impact on the capital market, especially among the investment/mutual funds and asset management communities in the country and region.
Is the community ready to capitalise on these opportunities?
From the onset, these organisations should assess their internal operations and technical capabilities, and where required, revamp and streamline operational and business processes.
Three key areas that investment funds and AMCs should prioritise are:
- Scalability of business – Companies should ensure they have business scalability to consistently chart growth. They should possess the relevant support mechanisms and digital framework to enable them to provide top-notch solutions. As the capital market matures, there will be a need for more sophistication in services so AMCs must stand ready to be able to deliver.
- Business adaptability – Companies must be able to quickly adapt to changing market needs and environments. Be it industry, customer or regulatory requirements, investment funds/AMCs should possess the ability to cater to changing needs without any downside to their business growth.
- A “quick-to-go” approach – In today’s highly competitive level playing field, investment funds/AMCs that have the ability to quickly act and penetrate markets would obviously stand to gain the most. However, they must be backed by back-office support frameworks to ensure business continuity.
Strategic market offerings
Despite the growing opportunities in the capital market, limitations among investment/mutual funds, including AMCs, could hamper their growth.
Hence, it only makes sense for these organisations to work closely with industry-leading software and solution providers to realize their business objectives.
Today, there are a variety of strategic solutions offered by service providers for investment/mutual funds and AMCs.
Some of these include registrar and transfer agency services/corporate registries across all asset categories of mutual funds; pension funds and other investment products; fund accounting and digital services for investors and distributors; mutual fund solutions for asset managers and distributors and; alternative investment fund and private wealth management.
These value-driven services are a representation of the growing needs of the capital market today. It is, therefore, important for investment/fund managers and AMCs to establish close collaborations with service providers to achieve higher growth.
Fund managers should identify solution providers that possess the required credentials and skills while offering a broad spectrum of integrated top-end services not only for established investment/mutual funds and AMCs but also for the newer market players.
In conclusion, both the business solution providers and the investment fund/AMC community should work together in realizing long-term business goals.
This would not only pave the way for increased growth capacities among investment funds/AMCs but also serve as a benchmark for continued growth and sustainability. – Oct 2, 2022
Quah Meng Kee is KFin Technologies (Malaysia) Sdn Bhd country manager and the company’s regional head for Southeast Asia.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
Main photo credit: Reuters
