Industry trends to watch in 2023
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Industry trends to watch in 2023

The last few years have delivered a fair share of ‘once-in-a-lifetime’ setbacks for asset managers and investors. As we come out on the other side, I am excited about the opportunities.

1. The return to positive interest rates

Bonds and cash are now legitimate alternatives to stocks

We have been living with zero percent rates – and what is essentially free money – for too long. There are investors today who have never lived in an environment with a real cost for borrowing money. This environment is exciting because a business cycle downturn, which is often tied to a rising cost of money, clears out weak and inefficient companies, and gives active managers the opportunity to separate the wheat from the chaff. It has been too long since we have had a more traditional business cycle. The Covid pandemic and global financial crisis were completely different situations. The key in this environment will be to avoid areas where there has been excessive risk-taking – because that risk-taking will be penalised in an environment where nominal and eventually real interest rates are rising.

2. Delivering cost-effective customisation

There is growing industry desire – and demand from investors – to align investment capabilities and services more closely with investor needs

The typical large asset management business model is based on scale. We know how to put together a great product and deliver it to a lot of investors. But more and more we are being asked to create models and solutions that will help both retail and institutional customers cope with a wider range of more specific challenges and opportunities. Custom is the opposite of scale, so that’s a big change in how we, and our peers, are going to need to think and operate.

The way to create cost-effective customisation is to dramatically increase operational efficiency. To be among the long-term winners, asset managers will have to get their act together and clean up their front, back and middle offices to better serve clients, report to them in the ways that they need and want, and drive down costs.

I think that client preference will apply to responsible investment (RI). While RI and ESG (environmental, social and governance) have become integral to investing in Europe, in the US there is a continuing debate on the merits of RI versus return. Are ESG factors going to be decisive factors in what makes a good investment? Depending on the objectives and the investor, that may not always be true. For our part, ESG is an essential component of our research capability, and we can dial up or dial down the ESG analysis that goes into selecting securities for our client portfolios as they see fit.

3. The uncertain global economic influence of China

The country seemed on its way to competing with US and European economies, but the political environment has regressed and economic progress has stalled

The rise of China has been a big theme throughout our lives, but we now have a situation that is highly problematic: complete control resting in the hands of one person. One of the side effects of this kind of consolidated power is the arbitrary application or changing of the rules of doing business. Businesses and individuals that gather too much economic power can get sidelined, shut down or jailed. This kind of interference with business and the free-market economy is a major obstacle to China becoming a real competitor in the world economy. Other limits to China’s potential include a currency that is not freely convertible and a financial system that is overly reliant on bank credit due to a limited bond market.

4. The continued relevance of talent

Ten to 20 years on, the core of our business and relationships will remain relevant. But changes in who is delivering what they are delivering and how they deliver are coming

Today our business is a robust three-legged stool: we’ve got the investment side of the organisation, the customer-facing side, and the operational side. Every part of that is continually evolving, but the fundamental activity remains the same: putting investment talent to work on behalf of our customers. I don’t see the value of that approach being seriously challenged, despite the emergence of AI-driven and automated solutions.

However, where and how that investment talent works, and who is delivering it, is changing. The barriers to entry in asset management are fairly low, so there is always going to be room for specialty firms that do one or two things really, really well. But among the large firms that offer multiple products and services, I think there is going to be further consolidation. So we should expect fewer players at the top competing for that talent and each other’s customers.

Just like operational excellence, quality and depth of research is – and will continue to be – a key competitive differentiator and measure of value for investors. I think we will see increasing investment in advanced analytics and big data analysis that help research teams distil more relevant data and get to the investment conclusion more quickly.

12 janvier 2023
William F. “Ted” Truscott
William F. “Ted” Truscott
Chief Executive Officer
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Industry trends to watch in 2023

1Reuters, Mission accomplished? Europe fills gas storage ahead of schedule, 4 October 2022

2IEA, Global energy crisis, June 2022

3IEA, Record clean energy spending is set to help global energy investment grow by 8% in 2022, June 2022

4As at September 2022

Important information

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). This is an advertising document. This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services.

Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. Risks are enhanced for emerging market issuers.

The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be appropriate for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either.

Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This is an advertising document. This document and its contents have not been reviewed by any regulatory authority.

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.

In the USA: Investment products offered through Columbia Management Investment Distributors, Inc., member FINRA. Advisory services provided by Columbia Management Investment Advisers, LLC.

In the UK: Issued by Threadneedle Asset Management Limited. Registered in England and Wales, Registered No. 573204, Cannon Place, 78 Cannon Street, London EC4N 6AG, United Kingdom. Authorised and regulated in the UK by the Financial Conduct Authority.

In the EEA: Issued by Threadneedle Management Luxembourg S.A. Registered with the Registre de Commerce et des Societes (Luxembourg), Registered No. B 110242, 44, rue de la Vallée, L-2661 Luxembourg, Grand Duchy of Luxembourg.

In Switzerland: Issued by Threadneedle Portfolio Services AG, Registered address: Claridenstrasse 41, 8002 Zurich, Switzerland.

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors’ with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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true

Important information

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). This is an advertising document. This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services.

Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. Risks are enhanced for emerging market issuers.

The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be appropriate for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either.

Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This is an advertising document. This document and its contents have not been reviewed by any regulatory authority.

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.

In the USA: Investment products offered through Columbia Management Investment Distributors, Inc., member FINRA. Advisory services provided by Columbia Management Investment Advisers, LLC.

In the UK: Issued by Threadneedle Asset Management Limited. Registered in England and Wales, Registered No. 573204, Cannon Place, 78 Cannon Street, London EC4N 6AG, United Kingdom. Authorised and regulated in the UK by the Financial Conduct Authority.

In the EEA: Issued by Threadneedle Management Luxembourg S.A. Registered with the Registre de Commerce et des Societes (Luxembourg), Registered No. B 110242, 44, rue de la Vallée, L-2661 Luxembourg, Grand Duchy of Luxembourg.

In Switzerland: Issued by Threadneedle Portfolio Services AG, Registered address: Claridenstrasse 41, 8002 Zurich, Switzerland.

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors’ with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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