We recently released our Capital Markets Vision 2022 research, which identifies the trends shaping the industry over the next several years and the 17 priorities that industry players should pursue in response.
Of these priorities, seven are particularly relevant for institutional investors. While there is much more to be said about each of them, I thought a quick summary of implications could be valuable.
- AI-enabled transformation of investment management. For institutional investors, this is mostly related to deploying new AI-powered solutions to support the consistent delivery of true alpha by tapping into previously inaccessible signals and using them to inform investment decision making. This could take the form of either a list of potential securities to invest in (e.g., in public markets quantitative strategies) or additional information supporting specific private markets deal assumptions (e.g., quality of management practices for a potential target).
- Taking the three lines of defense into the digital age. For institutional investors, this means changing the culture of risk management to promote “future-proof” behaviors and safeguards that offset new machine risks (e.g., potential biases that may become institutionalized as AI algorithms are trained with historical data) and human risks (e.g., habits like inadvertently trusting phishing emails that may expose the broader organization to cyber threats).
- Hiring and managing the new workforce. For institutional investors, this means aligning the HR and management models to attract and retain the new skills required to compete (e.g., what should be the analytics career path, what are the non-traditional talent sources to consider). It also means reimagining both work and the workforce to create a differentiated value proposition (e.g., what new roles such as “AI ethicist” should be created, how should role descriptions be redesigned to enable greater automation of tasks and effectiveness).
- Turning “dark data” into business impact. For institutional investors, this means deploying new technologies to maximize visibility into all the data available across the organization (including data that exists within the organization but is not used for anything). It could also include breaking down “data ownership” siloes and democratizing access to accurate, clear and interoperable information that could be used to inform business decision making (e.g., around risk management).
- Systematic approaches to “stractical” technology investment. For institutional investors, this means designing and implementing the correct operating model and environment to engage an ecosystem of external partners (e.g., universities, technology companies) who can work effectively alongside internal teams to push a wide range of innovation initiatives past “proof of concept” into scaled production at speed.
- Building flexible and resilient infrastructure. For institutional investors, this means combining a range of leading cloud and cyber technologies to build a modern IT and data infrastructure that addresses their growing needs for agility (e.g., to open international offices), flexibility (e.g., to spin environments up/down in support of innovation), computing power (e.g., to enable AI-powered decision making), and resilience (e.g., to protect the organization from bad actors).
- Pivoting to the “new” while dealing with the “old”. For institutional investors, this means rationalizing a range of historically fragmented investment systems, which are often highly customized (e.g., performance calculation), and unpacking data flows to enable new functionality-rich services (e.g., self-serve data solutions) while preserving the organization’s ability to process high-volumes of business-critical transactions.
As the boards and management teams of institutional investors contemplate how to future-proof their organizations, we expect investments in the seven areas outlined above to increase greatly in the coming years. If you’d like to continue the conversation, contact me at email@example.com.
To learn more about the research, read Capital Markets Vision 2022.