Administration March 10, 2005

Investment Managers: If You've Seen One You've Seen Them All?

October 3, 2005 (PLANSPONSOR.com) - Investment management companies will find it increasingly difficult to differentiate themselves in the marketplace in the future, according to a Bank of New York (BoNY) study.
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According to a BoNY news release on the study, the market for Investment Managers is likely to become more crowded and IMs will need to find new and better ways to differentiate themselves from others.

The study found that IMs overwhelmingly believe the two most fundamental criteria for success are generating gains and attracting and retaining key talent to be able to produce those gains.   According to BoNY, attracting and retaining key talent will be the challenge as it will increase compensation costs for IM firms.   In addition, the lure of greater equity stakes and greater autonomy provided by hedge funds will increase the difficulty of retaining key staff.

Following the two fundamental criteria for differentiation, according to the study, were distribution, focus on core competency, product focus, and targeting clients.   Cost containment, growth strategy, risk management, and technology were not ranked high as differentiators.

Other key findings of the study include:

  • The number of new entrants in the market will keep up with the rate of consolidation in the industry.   Therefore, in the short term, there may actually be an increase in the number of IMs in the marketplace, making it difficult to stand out from the crowd.
  • The ability to get products to the market quickly is a major concern for IMs.   Many are investing in new product development and distribution strategies in order to develop their business.
  • The majority of respondents to the study believe that, while there are some examples of successfully combining the roles of distribution and manufacturing, these roles will continue to be separate businesses because a management team can only be good at distribution or manufacturing, but not both.
  • Most respondents agreed that companies that have a clear understanding of and can focus on their core competency will be able to produce the greatest shareholder value and be the leaders of the future.
  • Marketing departments can expect bigger budgets and more staff as senior management believes better branding is required to differentiate firms from their competitors.

The “Survival of the Fittest: Future Leaders in Investment Management” white paper is  here .

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