As asset managers seek to adapt to a competitive landscape, a significant shift towards outsourcing trading operations is anticipated for 2025, driven by the need for expertise and diversification.
As the competitive landscape for asset management intensifies, businesses are increasingly exploring new avenues to maintain their edge in the market. According to a recent survey conducted by Northern Trust involving 300 global asset managers, a significant 71% identified infrastructure as a target for increased distribution, while 54% are eyeing digital assets, and 49% are looking towards real estate. This shift reflects an industry trend towards diversification in response to the challenges presented by a complex marketplace.
Stephanie Farrell, Head of Integrated Trading Solutions, Americas, at Northern Trust, highlighted the implications of these evolving strategies. “Managers may lack the market knowledge and access needed to enter new asset classes and markets, and they may not have the expertise in place to execute trades at the highest levels of effectiveness and efficiency,” she explained. In this regard, the option for firms to engage an outsourced provider offers a solution. Such providers can deliver global trading capability with teams located in various regions, ensuring that clients benefit from local market expertise and seamless execution, particularly in regions like APAC.
The trend towards outsourcing is gaining traction, with nearly 30% of respondents to Northern Trust’s survey indicating a willingness to outsource their trading operations. While cost-efficiency has been a primary concern in recent years, the emphasis is shifting towards enhancing the quality of execution. This expansion of outsourced trading services is highlighted by the significant growth seen in Northern Trust’s Integrated Trading Solutions throughout 2024, particularly in fixed income where a remarkable increase in trading volumes was recorded. This surge can be attributed to larger mandates and strategic allocations by managers leveraging these services to access new markets.
Looking ahead to 2025, Farrell anticipates the trend of outsourced trading models transitioning from a niche approach to a mainstream strategy for large-scale asset managers. She noted that clients are increasingly diversifying into new asset classes and global markets, which often necessitates external support given the limitations of in-house expertise and technology. The rising demand for enhanced distribution and improved client experiences will likely drive this shift, as managers seek partners capable of providing comprehensive office support—spanning front, middle, and back-office functions—integrated with the latest technological advancements.
Farrell concluded by emphasising the tailored nature of asset management, stating, “Every asset manager is unique, and an outsourcing partner with long-established expertise and credibility can allow firms to go to market more quickly while deploying their in-house resources in the most efficient way.” The industry’s trajectory suggests a growing recognition of the benefits that outsourcing can provide, shaping the future of asset management practices significantly.
Source: Noah Wire Services
- https://www.northerntrust.com/content/dam/northerntrust/asset-servicing/global/en/documents/insights-research/2024/driving-growth-in-asset-management-2024.pdf – Corroborates the shift in asset managers’ strategies towards enhancing quality and accuracy, and the expansion into new asset classes such as infrastructure, digital assets, and real estate.
- https://www.northerntrust.com/middle-east/pr/2024/northern-trust-survey-asset-managers-pursue-right-product-right-fit-strategy-to-drive-distribution – Supports the findings from Northern Trust’s survey, including the focus on quality and accuracy, and the trend towards outsourcing non-core activities like trading operations.
- https://www.northerntrust.com/united-states/insights-research/2024/asset-servicing/driving-growth-in-asset-management-2024 – Details the survey results and the evolving strategies of asset managers, including the emphasis on enhancing the investor experience and the use of technology and outsourcing.
- https://www.northerntrust.com/content/dam/northerntrust/asset-servicing/global/en/documents/insights-research/2024/driving-growth-in-asset-management-2024.pdf – Highlights the importance of data management and the challenges associated with it, which is driving the trend towards outsourcing data management services.
- https://www.northerntrust.com/middle-east/pr/2024/northern-trust-survey-asset-managers-pursue-right-product-right-fit-strategy-to-drive-distribution – Mentions the specific percentages of asset managers targeting different asset classes and the growing trend of outsourcing to enhance market penetration and investor experiences.
- https://www.northerntrust.com/united-states/insights-research/2024/asset-servicing/driving-growth-in-asset-management-2024 – Discusses the need for continuous innovation and strategic agility in response to market challenges, including the role of outsourcing in managing these challenges.
- https://www.northerntrust.com/content/dam/northerntrust/asset-servicing/global/en/documents/insights-research/2024/driving-growth-in-asset-management-2024.pdf – Explains how asset managers are expanding their product sets to better differentiate themselves and meet the diverse needs of their clients, including those in different life stages.
- https://www.northerntrust.com/middle-east/pr/2024/northern-trust-survey-asset-managers-pursue-right-product-right-fit-strategy-to-drive-distribution – Details the challenges faced by asset managers in entering new markets and the benefits of engaging outsourced providers with global trading capabilities.
- https://www.northerntrust.com/united-states/insights-research/2024/asset-servicing/driving-growth-in-asset-management-2024 – Highlights the growth in Northern Trust’s Integrated Trading Solutions and the increasing demand for outsourced trading services, particularly in fixed income.
- https://www.northerntrust.com/content/dam/northerntrust/asset-servicing/global/en/documents/insights-research/2024/driving-growth-in-asset-management-2024.pdf – Emphasizes the importance of tailored solutions in asset management and how outsourcing partners can help firms deploy their resources more efficiently.
