February 07, 2022

Key Trends 2022: Asset Management - Investment

2022 looks to overcome many of the uncertainties that perpetrated the market in 2021. Moody’s has suggested that the industry is in good health looking to 2022. From an investment perspective ESG and Alternatives are likely to be top of the agenda. Client interaction is set for further evolution with technology playing a major part here. Technology is also set to impact how Asset Managers best facilitate the continued ‘new normal’ of working. Asset Managers need to demonstrate a continued level of flexibility; both with how they approach investing and their engagement with colleagues and clients. A further focus is to create a strong alignment of culture with company values to make the business appeal both internally and externally.

Carlyle has collated intelligence and insight to provide a snapshot of what 2022 may hold for the industry.

Long term risks continue to be a consideration whether it be new COVID variants, rising interest rates, inflation, policy changes from Central Banks, or bottle necks from consumer spending.

That said, several trends are expected to emerge this year not least the continued rise of Alternatives. No longer the niche of institutional investors but with wider access given to wholesale clients. Asset Managers with a private market’s capability may need to consider how they approach the wholesale market to take advantage of the expected inflows. This may mean the setting up of a new function or an expansion of an already, albeit small, team. In light of this, more private market funds are expected to be set up in the form of “unregulated funds/partnerships.” From an institutional investor perspective, they may look to allocate more to Commodities and Real Estate strategies in order to mitigate the risk of transitory and secular inflation.

An obvious way for traditional managers to expand into Alternatives is through acquisitions, a number of which occurred in 2021. However this comes with its own risks not least the valuation of potential acquisitions, which are expected to increase with more demand, and the potential cultural challenges this brings. Expanding more organically through smaller team acquisitions is a way of mitigating such risks. However, the ever-increasing pressure to find profitable growth opportunities has reached the point where not having these capabilities is too great.

Sustainability as a trend has moved at tremendous pace over the last few years, not just within the asset management industry but across all industries. One of the biggest changes is the use of data by investors, with more data than ever available best exampled by Scope three. Asset Managers need to be in a position to analyse and act upon this data, to make it a natural part of the research approach. Not doing so potentially means they run the risk of being left behind.

Although inflows have slowed since peaking in 2020, a report by Celente suggests that assets in dedicated ESG funds are expected to top $53trillion by the end of 2022. Specifically Green Bonds and Private Market strategies are expected to see a great portion of this. In addition, the report notes 8 out of 10 millennials now care more about ESG factors than just pure returns. Asset Managers need to consider this. They need to be able to disclose their ESG research to capture the attention of this audience and how it forms part of the investment decision making process.

In light of the above, Asset Mangers are expected to launch holistic products to differentiate themselves. Asset Managers will need to take a customer-led approach, where product design is just one aspect. There is a need to fulfil other desires including purpose, creating an impact whether that be at community level or with a specific aim in mind. Returns are not the sole aspect for the new age of clients.

2022 will see a continuation of existing trends when it comes to investment. Asset Managers need to have the right teams and strategy in place to stand themselves apart in an ever-increasing competitive landscape.

George Windsor, Head of Asset Management, Carlyle

Carlyle 2022 Annual Salary Survey