91% of fund managers turn to outsourcing amid complexity, says study
DUBLIN, IRELAND—The fund management industry is increasingly turning to outsourcing due to growing regulatory complexities and the need for innovation.
A recent study by Carne Group, a fund regulation and governance solutions provider, revealed that 91% of fund managers anticipate greater reliance on third-party service providers for fund administration functions over the next 12 months.
The research, which involved fund managers from 10 countries managing a collective $1.6 trillion, indicates that 41% expect a dramatic rise in the use of third-party services, with another 50% foreseeing a slight increase.
The primary drivers for this shift include challenges in recruiting suitable staff, the escalating regulatory burden, and the necessity to operate across multiple jurisdictions.
Furthermore, 79% of fund managers predict an uptick in the outsourcing of fund management company operations over the next three years.
The ability to introduce diverse product sets, accelerate market entry, and ensure robust fiduciary fund management are cited as key reasons for this trend.
In a parallel study with wealth managers and institutional investors, who manage $1.7 trillion in assets, 94% expressed concerns about the growing difficulty in managing regulatory environments by 2026.
This sentiment is echoed in the administrative domain, with 64% planning to outsource more to third-party providers in the coming year.
John Donohoe, CEO of Carne Group, highlighted the industry’s struggle with regulatory demands, stating, “Many asset managers are struggling with the impact of the continually increasing regulatory burden, the costs to their businesses, and impact on investor returns.”
He added that the use of specialist third-party providers allows firms to expedite revenue generation and concentrate on product innovation, investment performance, and asset raising.
The study underscores the importance of innovation in the fund management sector. Technology and alternative data are the main innovation drivers, followed by better insights into the performance of alternative asset classes.
A similar study by capital market company Ocorian also found that 96% of fund managers plan to utilize third-party fund administration providers in the forthcoming three years.
As regulatory complexities mount, fund managers are poised to embrace outsourcing as a strategic response, enabling them to navigate the changing landscape and focus on innovation and differentiation in a competitive market.
