In our recent 2022 Investment Management outlook, we discussed the potential for digital transformation to help investment managers deliver value to their stakeholders across investment performance, distribution and product development and operations.
A poll of attendees showed that almost all participants expected continued growth in 2022, with more than 40% expecting this to be double digit growth. Although there is strong growth anticipated, nearly two thirds of respondents were also planning significant structural change during the year either to enhance capabilities or to improve operational efficiency.
At a capability level, these changes are focused on two main areas. First on product development where firms are looking to create or expand ESG ranges and to bring on new capabilities in alternatives which remains a high growth, high margin area. Second, we see increasing focus on the use of data and analytics (including AI) to support both alpha generation and more effective operations and distribution.
Our research shows that leading firms spend 4x the amount on data and technology, and in return have 5x the organic growth of laggards, coupled with longer retention and better investment performance. Furthermore, front runners in spending on digital transformation have 50% higher operating margins.
Despite this, and the intent to invest in change expressed in our poll, attendees only 15% of respondents saw digital transformation as being core to their strategy. And across Europe, our research shows just 20% of CTOs are expecting to increase spending on AI, data and analytics or cloud computing. We believe this environment creates an opportunity for those who do increase their investment in digital change to move further ahead of the laggards.