Global forces shaping the new era of managed services in the fund industry

In the dynamic world of finance, outsourcing has evolved from a mere trend to a fundamental aspect of operational strategy. Our recent study highlights that 90% of financial centres engage in outsourcing, underscoring its entrenched status within the industry. This trend is mirrored globally, as financial institutions worldwide increasingly turn to managed service providers that extend beyond traditional back-office functions.

Rethinking operations: a global perspective

Globally, players in the Asset and Wealth Management (AWM) alternative sector are rethinking their operational structures. The core question they face is whether activities should be managed internally, outsourced, or through a combination of both. This consideration is a common theme across major financial hubs around the world.

In recent years, the evolving role of back-office operations has come under scrutiny with a growing interest in strategies like co-sourcing. This approach is gaining momentum as a way to address skill shortages, harness technology and maintain compliance amid a global talent shortage. Today, alternative investment players continue to refine their strategies, with cost being just one of many factors influencing outsourcing decisions.

Global economic trends: catalysts for change

The reconsideration of operating models is driven by global economic forces. Persistent inflation, elevated interest rates and uncertain growth define the current landscape, affecting financial markets worldwide.

The slowdown in the industry, due to these macroeconomic factors, has forced fund managers globally to reassess their operations, aiming for a competitive edge and enhanced agility. Our 'Sourcing Strategies Survey — The Age of Strategic Agility' reveals that 90% of respondents outsource some activities, with 88% among Alternative Investment Fund Managers (AIFMs). The trend is shifting towards single providers, emphasising quality and expertise over cost, with increasing demands for comprehensive service.

Additionally, geopolitical instability and trade disruptions have become global constants. This, coupled with rapid technological advancements, necessitates a re-evaluation of operational models. Artificial intelligence (AI), in particular, is poised to redefine industries globally.

Strategic agility in a changing world

A notable portion of fund managers intended to change their fund administrators or services providers. This trend continues worldwide, with numerous managers initiating requests for proposals (RFPs) to develop new or updated operating models.

Alternative investment players must be agile and forward-thinking to thrive in a volatile world. In exploring co-sourcing or outsourcing solutions, financial players are increasingly seeking technology-enabled services backed by skilled professionals to navigate complex regulations. Quality is paramount.

Some institutions are transitioning from in-house operations to outsourcing, recognising the challenges of building and maintaining capabilities internally. Continuous investment in peripheral expertise can be resource intensive.

The importance of smooth transitions

Adopting a new operational model globally can be daunting, with cultural resistance and fears of losing control. A robust managed services partnership can alleviate these concerns.

There are myriad factors influencing the right profile selection in today’s challenging global economy. Fund managers, management companies and service providers must carefully evaluate potential operating models.

Outsourcing has evolved. In the past, fund managers engaged multiple providers for basic tasks. Today, they seek deeper partnerships, leveraging real-time data and hybrid models that extend beyond the back office.

Attributes of a strong global managed services partnership

1. Partnership mindset: service providers should act as partners, offering insights and solutions beyond mere deliverables.
2. Global approach: an integrated approach covering all the operations of the asset managers globally is a must in our current world.
3. Client-centric service delivery: a collaborative approach is essential for effective managed services.
4. Technology integration: new technologies are reshaping operations. Efficient data management and automation are gamechangers.
5. Digital client experience: a seamless, scalable digital experience from onboarding to real-time insights is crucial.
6. One-stop-shop or á la carte services: there is a trend towards single providers offering comprehensive services, though some clients prefer tailored solutions.
7. Economies of scale: scalability and best practices in technology and HR are vital for adapting quickly without straining budgets.
8. Expanding to the middle office: managed services are extending beyond the back office, addressing middle-office functions like risk management and performance measurement.

Embracing the new era

Research shows that top-performing companies leverage service partnerships for strategic advantage. These partnerships provide expertise, technology and innovation, essential for transformation and performance. For fund managers globally, considering a strategic managed services solution can enhance agility, close talent gaps and foster innovation. This allows a focus on high-value activities, improving the likelihood of achieving and sustaining desired outcomes.

This article was authored by Stéphane Rinkin, Partner at PwC Luxembourg, Paul Martin, Partner at PwC Ireland, and Sean King, Managing Director at PwC US.