Expert: Brian Aherns, PGIM Facilitator: Ralph Jackson
Headlines:
1. Rising challenges for investment managers, including increased coverage demands, product complexity, and talent retention struggles
2. The evolving landscape of ESG investing and its performance, adoption, and regulatory hurdles
3. Mixed perspectives on the adoption of AI in fund assessment and performance evaluation
4. Fee compression, product innovation, and consolidation trends shaping the UK investment market
5. Best practices for manager research, emphasizing performance persistence, factor analysis, and personal rapport
Discussion points:
Industry challenges and trends in active investment management
Participants discussed the increasing complexity of investment products, particularly in alternatives and private equity, and the rising demand for specialist expertise. Talent retention is a major challenge, with experienced professionals moving to hedge funds and private equity for higher compensation. While active management in the US remains competitive despite fee pressures, UK advisers face fragmentation and margin-focused strategy shifts.
Fee structures, market consolidation, and product offerings
The group explored the higher fees charged in the UK compared to the US and the challenges of launching new funds amidst regulatory constraints. Market consolidation is reducing fund choice, while fee compression continues. Participants noted the adaptability of UK advisers in navigating these pressures to maintain profitability.
Perspectives on ESG investing and its regulatory context
Scepticism about ESG performance claims and noted slower adoption in the US, partially due to regulatory pushback. UK participants highlighted challenges such as greenwashing, regulatory ambiguity, and excessive box-ticking for compliance. Both markets see a need for better ESG standardisation and education to improve decision-making and align with regulatory demands.
AI in research processes and investment management
AI adoption in fund assessment remains limited, with participants sharing mixed experiences. While US firms have seen minimal integration of AI in research, UK advisers have utilized AI for administrative tasks, such as documenting meeting outcomes. The group acknowledged AI’s potential for future efficiency improvements but cited current limitations.
Manager research best practices and performance evaluation
Empirically driven research methods were emphasised, such as performance persistence screening and factor analysis, over qualitative assessments. UK participants advocated for person-to-person engagement during onsite visits, highlighting the value of rapport-building. The group also discussed research coverage scope, noting that US analysts typically cover more funds than their UK counterparts.
Key takeaways:
· Address challenges in talent retention and product complexity by investing in specialized expertise and optimising research resources
· Navigate fee compression and market consolidation by focusing on strategic adaptability and innovative product offerings
· Enhance ESG investing practices by advocating for clearer standards, improved education, and solutions to greenwashing concerns
· Explore opportunities to integrate AI and automation into research workflows to improve efficiency and reduce administrative burdens
· Refine manager research methodologies by leveraging performance persistence analysis, factor screening, and qualitative engagement to ensure robust evaluations
· Monitor regulatory and industry developments to adapt strategies for maintaining competitiveness in an evolving market landscape
· Balance research coverage to maximise focus on high-potential funds and areas where active management outperformance is achievable
