New trading strategies and technology are asset managers’ best bet, Acuiti report finds

Acuiti has launched its Asset Management Expert Network, a virtual forum focused on the global derivatives markets through which senior executives can gauge sentiment and benchmark approaches to common challenges.

Members of the network have the opportunity to pose questions anonymously to their peers and, on a quarterly basis, Acuiti provides an analysis of attitudes and approaches to the challenges the network is facing at that time.

Asset management experts have concluded that challenging market conditions caused by rising interest rates require new asset allocation and trading strategies, as well as an increased focus on risk and collateral management.

To support the systems needed to put this into place, investment in technology is warranted, the report concluded.

Greatest opportunities, main challenges, regulation, tokenization

For this quarterly report, the network focused on barriers to growth, headcount, approaches to key regulatory reforms facing the market today and how asset managers view the landscape for third-party technology provision.

The key findings of the inaugural report are:

• Asset management executives see the greatest opportunities in new trading strategies and investment in technology
• Cost bases are the main challenge that network members are dealing with
• Active account proposals in EMIR 3.0 are already having an effect on firms’ euro swap holdings, with over a third moving a portion of their books to an EU CCP
• Network members are divided on T+1 settlement, with some fearing it will cause operational complications
• Tokenization is seen as a promising collateral management tool, but many still perceive it as an immature solution

Upcoming regulatory changes include EMIR 3.0 and T+1 in US markets

Ross Lancaster, head of research at Acuiti, said: “After a challenging 2022 and first half of 2023, asset managers have continued to grapple with the unpredictable market conditions caused by rising interest rates.”

“These shifts have led to reviews of asset allocation and trading strategies, as well as an increased focus on risk and collateral management. As many asset managers look to change how they position in markets, there is also a need for investment to support the systems needed to put this into place as efficiently as possible.

“At the same time, firms are preparing for a new wave of regulatory change. European authorities are preparing EMIR 3.0 and those that trade in US markets are moving towards T+1 settlement, both of which present significant challenges to asset managers. In this report, we take a look at approaches to these challenges and also provide the first input for our sentiment index, a quarterly measure of how asset managers are feeling about their business prospects for the quarter ahead.”