No Flavor of the Month
Asset managers join forces to return to their offering their clients well-needed products.
Transparency and due diligence have become key buzz words amongst the asset management community since the financial crisis of 2008. The heightened regulatory investment environment has also in part forced asset managers to focus greatly on risk management, and compliance.
While utilizing best business practices is paramount for all firms, a strong sense of product develop has resurfaced, according to Lisa Baird, a senior member of the Asset and Wealth Management Practice at Russell Reynolds Associates.
“There has been a return to focus on what kind of products to bring to market that can help solve the needs of clients,” said Baird, who stated that the refreshed mantra is unlike “bringing out the flavor of the month regarding new product offerings.”
Moreover, she noted that firms are keen to achieve “absolute return, not relative return” for clients, with a heightened sense of a liquidity as “unpredictability,” and low interest rates are the new normal for markets going in into 2012.
“Asset managers need to develop and devise strategies to incorporate that for uncertainty and move forward in ways that incorporate risk parameters and investment time frames, versus in 2008 where they needed to stop ‘business as usual’ and wait…they can’t wait anymore,” said Baird.
Most importantly, solutions for investors today need to have a multi-asset class approach, Baird told Markets Media.
“Multi asset class solution oriented products are key for developing alpha. Clients would like to see theme such as transparency, downside protection over outperforming the benchmark,” Baird said.
Russell Reynolds has also specifically mentioned that exchange traded funds (ETF), and index investing are gaining traction amongst retail and institutional investors.
“To maintain margins in a period of significant volatility and increased regulatory change, fund managers are designing new products, improving transparency, reducing costs and boosting operating efficiency,” the firm reported.
“The largest firms with the best operational infrastructures are dominating flows and charging the highest fees, enabling them to diversify, scale, and attract top talent.”
Innovation and technology can help the buy side source liquidity, Chris Fiorito of River Road AM writes.
The exchange now offers 40+ CVOL indexes across nearly every major investible asset class.
Circuit breakers were triggered in March 2020.
The number and size of margin calls can contribute to stress in the financial system in extreme volatility.
The new indexes are based on energy, metals and agricultural markets.