Slide 1: Exploiting Uncertainty in Investment Markets
Exploiting Uncertainty in Delivering Intelligent Insights Investment Markets September 2010 Strictly Private and Confidential
Slide 2: Introduction
Introduction The study aims to provide an early indication of how asset managers worldwide see their prospects and what they need to do to ensure that a resilient industry emerges from the ashes of the 2008 meltdown. Taking a 3 year forward view, this study covers four questions: – What will be dr
Slide 3: Theme 1
Theme 1 Clients no longer manage risk, they manage unpredictability: so their needs have changed. The amount of new money coming into the market will be limited and existing assets will be recycled between regions, asset classes and clients segments “There is at least one point in the history of a
Slide 4: Key Discontinuities Experienced by Clients
Key Discontinuities Experienced by Clients 1990‟s 2000‟s Risk Return Features Moderately Stable Unusually Volatile Asset Classes Low Correlation High Correlation Trade-offs in Product Features Risk and Return Multiple Dimensions Volatility A „Noise‟ A New Asset Class Liquidity Incidental A New Asset
Slide 5: Risk Universe is Constantly Expanding
Risk Universe is Constantly Expanding The order of significance will depend on individual scheme circumstances. Sponsor covenant Active manager Interest rate Reputational Mortality Regulatory Liquidity Operational Alternatives Corporate spread Inflation DC products Equity
Slide 6: Markets and Asset Classes
Markets and Asset Classes Which markets and asset classes will grow most in the next three years and which will be the main sources of alpha? New Clients Geographic Alpha Markets Asia 56% Markets Asia 66% Europe 56% Europe 29% North America 32% LATAM 29% Middle East 21% North America 24% LATAM 16% M
Slide 7: Fee Structure and Staff Incentives
Fee Structure and Staff Incentives How will your fee structure and staff incentives change over the next three years? 0 10 20 30 40 50 60 Performance Fee That Kicks in With the High Water Mark Low Management Charge Plus Profit Sharing with Clients A Fixed Percentage Fee Only Low Management Charge Pl
Slide 8: Theme 2
Theme 2 Clients no longer manage risk, they manage unpredictability: so their needs have changed Business basics that deliver excellence will be the new silver bullet as markets remain volatile “Things that count, often can‟t be counted. Things that can be counted, often don‟t count” Albert Eins
Slide 9: Business Models
Business Models Which business models will deliver maximum value to clients in the new decade and how scalable will they be? Manufacturing Models Distribution Models Popularity Scalability Popularity Scalability Niche Specialists/ 44% 13% Multi-asset Class Assemblers 47% 34% Independent Boutiques Ad
Slide 10: Operating Model
Operating Model How Would you Describe your Company‟s Current Operating Model? Percentage of Respondents 0 10 20 30 40 50 60 An Integrated Company with Core Activities Performed in House Semi-autonomous Boutiques, Sharing Services Virtual Product-based Boutiques, Closely Tied to the „Mother Ship‟ A
Slide 11: What are the Main Operating Models in Asset Management?
What are the Main Operating Models in Asset Management? Integrated Producers Independent Boutiques Hierarchal Large businesses Standalone business units Compliance mindset Entrepreneurial mindset Layered leadership Product leadership Focus: Size leverage Focus: Skills leverage Integr
Slide 12: What Does Alignment of Interest Mean in the 2010s?
What Does Alignment of Interest Mean in the 2010s? Talent Pool Do we have motivated people who are incentivized to exceed Outsourcing Co-investing client Do we have Do our investment expectations? alliances with best professionals have a of breed external skin in the game? service providers? Non-fin
Slide 13: Optimal Division
Optimal Division What will be the Optimal Division of back-office functions in the next three years? Percentage of Respondents -90 -80 -70 -60 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 100 Custody and Settlement Securities Lending and Cash Management Derivatives Pricing and Processing Valuati
Slide 14: Conclusion
Conclusion How will your firm rise from the ashes of the 2008 meltdown? Where is your firm‟s growth going to come from? Is “The Client” truly the focus of your firm? Does your firm have a strong Risk culture? Have you an Operating platform fit for purpose? Source: Citi/Principal/CREATE 2010
Slide 15: IRS Circular Disclosure
IRS Circular 230 Disclosure: Citigroup Inc. and its affiliates do not provide tax or legal advice. Any discussion of tax matters in these materials (i) is not intended or written to be used, and cannot be used or relied upon, by you for the purpose of avoiding any tax penalties and (ii) may have bee