Asset Owners, Weathering the Changing Tides of Investment Trends

Tom Whitson, Jon Benson

Asset Owners – an Ever-Evolving Approach

Asset Owners’ investment theses are typically driven by a set of liabilities or high-level socio-economic ambitions and macroeconomic trends, which over time cause shifts in Strategic Asset Allocation and Asset Classes based on their expected returns. These shifts also play into changes in investment approach, with Asset Owners moving between Internalization, Externalization, Passive Management, Active Management etc., based on several factors.

A recent BNYM survey found that 68% of Asset Owners surveyed were either internalizing or externalizing – or both – over the next 5 years, with no clear winner in sight1. Regional nuances, age of the Asset Owner and the various sub-types will also impact the investment approach with Sovereign Wealth Funds in the Middle East and Asian Pacific favouring a hybrid approach to support local investment in stocks and infrastructure, while Pension funds in the US, EU and UK have a more split set of operating models. With no single approach being universally favoured and needs changing over time, what should one do, and what factors are important to look at?

Solving the Challenges of Ever-Evolving Needs

To solve typical Asset Owner challenges a holistic whole-book view of the portfolio is required to bring together all assets whether they are internal or external, public or private. Without this view, it is impossible for Asset Owners to efficiently track portfolio performance and risk against macroeconomic factors or ensure liabilities can be met. Typically, this becomes a question centred around three main factors:

Creating a flexible data layer – To create a Target Operating Model which facilitates the collection of disparate data sets from Alternative Asset Managers, External Public Managers, and Internal IBOR/ABOR data feeds, Asset Owners need a platform on which to centralize, manipulate and integrate this data. There are several solutions for this, such as using an Enterprise solution, outsourcing to your Custodian, and/or creating an internal ETL and Data Layer.

Picking the right Fund Admin & Custody and designing a bespoke service – The clear majority of Asset Owners outsource a range of capabilities across the Middle and Back offices with service providers offerings growing vastly in recent years. Picking the right partner, creating a joint operating model, setting up a key set of SLAs and creating the right governance and change process will allow the partner’s service to evolve with the fund’s needs.

Bringing in the right technology – Different investment approaches require varied functional capabilities. Internal investment management will require an OMS, an IBOR to complement the ABOR and fundamental research data. Alternative Assets may need CRM and robust unstructured data collection, and external investment management needs an agreed approach to sourcing IBOR/ABOR data in a timely fashion aligned to the reporting cycles.

Each of these areas has its own considerations and they need to be carefully thought through to avoid creating a Target Operating Model which does not support the business vision, cannot cope with changes or is overly complex and expensive.

How Can Alpha Help?

Alpha is the leading strategy and advisory firm to the Investment Management industry. We have worked with a wide range of Asset Owners from Pension Funds, Insurers, and Sovereign Wealth Funds to Endowments and Foundations in the UK, EU, APAC and the Middle East helping them solve their most complex challenges. Alpha supports our Asset Owner clients across a range of topics including:

  • Target Operating Model: Designing and implementing enterprise operating models
  • Technology: Selecting and implementing leading tools across all functions
  • Reporting: Enhancing client and regulatory reporting, including the integration of ESG
  • Data: Designing and implementing operating models to make the most of complex data
  • Service Providers: Selecting and migrating to new middle and back office operations service providers
  • Regulatory Compliance: Providing compliance, regulation and risk advice and support


About the Authors

Tom Whitson
Director, Asset and Wealth Management Consulting UK

Tom is a Director in Asset & Wealth Management Consulting at Alpha with over 11 years of experience in the industry and 15 years as a consultant helping clients to transform their businesses primarily through the use of technology.
Tom has significant experience working in the Middle East having spent five years based in the UAE working across a range of technology programmes helping clients to implement Investment Books of Record, Performance and Risk management systems.

Jon Benson
Executive Director, Global Asset Owner Segment Lead

Jon is an Executive Director at Alpha with a depth of experience covering asset managers, asset services and asset owners. Jon leads the work Alpha undertakes with Asset Owners building an unrivalled experience, supporting our client specific needs and how operating models, technologies and partners can help.
Jon brings 20+ years of consulting experience, within the asset and wealth management industry. Jon has led many industry-changing projects for a breadth of Alpha’s clients.