Now, more than ever, asset managers need to prove their worth. While underlying clients are inevitably focused on immediate market movements and the implications for their portfolios, this is also the time where they will judge whether their managers have earned their keep or not.
Having experienced numerous market downturns and financial crises over the course of my career, the one lesson that stands out above all others is that speed and responsiveness are everything. Managers need to react rapidly to client requests and questions, and having the right structures, messaging and reporting frameworks in place are vital to successfully manage the thousands of queries that investment businesses will undoubtedly be getting.
Equally critical, however, is that managers are anticipating the needs of their clients and, through different means of engagement, demonstrate an understanding of their customers’ needs.
In these sorts of scenarios, “risk” is the issue that catapults right to the top of clients’ agendas. Put simply, asset owners want to know that funds are safe and, by extension, what is being done to reduce downside exposure as much as possible. Explanation and reporting are therefore vital. This is not a time when client updates can wait until the next quarterly meeting – clients require responses in real time to both assuage their fears and to help them plan and take decisions.
Throughout this process, portfolio managers must be accessible and able to provide answers and insights on portfolio positioning and market expectations. Digital technology is proving of huge benefit here, and many asset managers have adapted to the current environment through the use of online meeting forums, webinars, podcasts and other tools to provide information. True and inspired thought leadership these mediums can really differentiate investment businesses in the current environment.
Reporting styles are also vital. The traditional 30-50-page reports, already a source of frustration for many underlying clients, have no place in such a crisis scenario! “Keep it simple” is a mantra that every asset manager should be following – short and concise explanations, that are focused exclusively on the key points investors want or need to see.
These areas – “the three Rs” (responsiveness, risk and reporting) – are, however, not just confined to investment issues. Managers must also be aware that while portfolio positioning and risk will be the foremost issues on clients’ minds, they will not be the only things being thought about. How investment businesses manage their operations and administration will come under scrutiny, as well the structure and strength of individual businesses themselves, as clients will want to be reassured as to the stability of the managers they employ. Updates at a corporate level are therefore also vital, particularly from those smaller managers that are disadvantaged in terms of resource relative to bigger players.
The extent to which this environment proves an inflection point for the asset management industry, while likely, remains open to question. Investment businesses face considerable risks, but this period may also prove one of opportunity for those taking a proactive, thoughtful response to client needs. Those that do not may not see the other side of this crisis.