Fund managers will have to undergo radical structural change to remain competitive according to John Casey, chairman of US consultancy, Barra Strategic Consulting Group.
Speaking at the IMN Corporate Pension Funds Summit in Palm Springs, Casey said that asset managers have become highly overstaffed and too inefficient. As an example he added that US managers alone employ 50,000 too many securities analysts.
He also warned that as firms got bigger and more complex, increased bureaucracy would see investment staff becoming frustrated, resulting in departures. Casey added that in order to compete firms would have to streamline and refocus on their core businesses. This he said would energise true talent and help firms to retain their best staff.
In the future, Casey said that successful money managers would fall into one of four categories:
- the distribution specialist: a firm that realises that developing investment products is not one of its strengths, and as such distributes third party investment products through proprietary channels. Casey's example was Charles Schwabb.
- the single platform manufacturer: the modern equivalent of an investment boutique, specialising in specific investment products with the biggest clients being distribution specialists.
- the franchise conglomerate: a multi-platform firm with centrally managed distribution, technology and operations capabilities.
- the financial holding company: a collection of firms brought together for financial advantage. Mellon and AMVESCAP were cited as examples.
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