Matt Pells, Product Manager, Funds Administration, explains that the firm works with four of the world’s five biggest custodian banks supporting their role as transfer agents.

“Our clients use our software to run their administration on behalf of fund managers,” he says. The firm also supports wealth managers and offers a front-end advice solution which supplies a digital platform for advisers.

Pells says: “Pre-Covid, on the transfer agency side of our business our clients were all about growing their business using a core registry that was resilient and scalable.

“Post-Covid, that focus switched from our clients who had achieved that scale and then needed to lower their costs and their risks so we were reaching out beyond the core registers, developing enabling technology and orchestration – business process modelling – that would enable clients to reduce their costs.”

Here, Pells reports one client reduced their operational overhead by 60 per cent.

However, clients wanted to reduce their risks as well and the firm created a financial messaging platform, Babel, which trades over a trillion a year, designed to take out the risk and cost element of trading.

The firm found that their clients also wanted to increase the digital experience of their clients, encouraging them to self-serve more, so the firm built new tools for end users, only to find that they struggled with digital adoption, so the next step was to work with clients to raise digital adoption across their clients.

“Change takes a little while to flow through,” Pells says, diplomatically, adding: “In financial services in particular, people are used to doing things in a particular way.”

Looking forward, Pells says that the firm’s clients are seeing new technological developments with new start-ups based on distributed ledger technology (DLT) systems and blockchain and new providers claiming they can use AI.

“Our clients are sitting up straight and saying ‘we will be left behind here’ so they are coming to us to ask what we are doing in this space.

“Fund managers are saying we want new products and a quicker time to market and our clients used to come to us and say, ‘can you support money market funds or hedge funds’? Now that has swivelled, and they ask for features such as ‘can you support liquidity management or performance fees because they recognise that investors are driving new products.

“It’s not an asset management type solution that they want, but a menu of features they can pick and choose from.”

Pells predicts that as the technology advances, there will be more collaboration as there will be no one solution from one firm so partnering will be more important particularly as new asset classes, such as crypto, appear and they want to go in as quickly as possible.”

The change is driven by new and better technology. “The impact of DLT will be huge and we will move to tokenisation in our business over time, but this is a long term play for the industry as a whole so near term solutions are vital,” Pells says.

His firm is taking its core registries and breaking them out into modules so that rather than three big systems, the firm has a set of modular solutions and in that process it is also mindful of the arrival of artificial intelligence (AI) in the industry.

“AI needs data and in the right format, so we have an eye on the future examining how we prepare that data model so that when AI comes along, we know how best it can consume that data. We are thinking about the future as we move towards it step by step.”

The difference in the overall remuneration of men and women across the UK’s financial boardrooms during the four-year period decreased due to a marginal fall in remuneration for male board directors at UK firms, and a concurrent uptick in remuneration for their female peers.

Overall pay across UK financial boardrooms fell between 2019 and 2023 on an average basis but remained higher than the European average every year through the period.

North American non-exec directors were found to have received significantly higher overall remuneration than their counterparts in the UK, primarily as a result of receiving equity and stock options in addition to their fixed-fee compensation, which UK and EU boards do not offer for independence and objectivity reasons.

Martina Keane, EY UK & Ireland Financial Services Leader, says: “UK financial services firms have made clear progress towards more equitable pay for male and female board directors, but the pay gap between genders remains stark. While more men than women sit on committees and occupy chair roles, the fact that women on UK boards earn a quarter less than their male peers on average is a concerning reality. Global competition for talent at board-level is only growing, and UK financial services firms must do more to further improve gender equity in their boardrooms and balance remuneration levels.”

Global gender pay comparisons

Between 2019 and 2023, average remuneration for female non-exec board directors across UK financial services firms increased 7 per cent, from USUSD209,987 in 2019 to USD225,275 in 2023. During this time, remuneration for male non-exec directors decreased 1 per cent, falling from USD301,966 to USD299,076.

By comparison, over the same period, the gender pay gap across European financial services boardrooms increased by five percentage points, from 31 per cent to 36 per cent.

Between 2019 and 2023, average remuneration for female non-exec board directors across European financial services firms increased by 12 per cent, from USUSD164,584 in 2019 to USD184,477 in 2023. During this time, remuneration for male non-exec board directors increased at a higher rate of 21 per cent, rising from USD238,706 in 2019 to USD287,994 in 2023.

Over the same period, the gender pay gap across the boardrooms of the largest North American financial services firms narrowed two percentage points, from 7 per cent to 5 per cent.

Remuneration awarded to female non-exec board directors across North American financial services firms increased by 13 per cent, from USD287,465 in 2019 to USD324,250 in 2023. Pay awarded to male non-exec board directors increased at a slower rate of 10 per cent, from USD309,392 in 2019 to USD340,481 in 2023.

In 2023, female directors tracked across UK financial boardrooms earned USD75 for every USD100 earned by male peers, compared with USD70 for every USD100 earned by male directors in 2019, representing a five percentage point decrease in the gender pay gap.

In contrast, in 2023, female directors tracked across European financial boardrooms earned USD64 for every USD100 earned by male peers, compared with USD69 for every USD100 earned by male directors in 2019, representing a five percentage point increase in the gender pay gap.

Comparing this to female non-exec board directors at North American financial services firms, women earned an average USD95 for every USD100 earned by their male peers, compared with USD93 for every USD100 earned by male directors in 2019. This represents a two percentage point decrease in the gender pay gap.

Gender splits within UK, European and North American boardrooms

The gender split (as at the end of 2024) across directors of UK financial services firms stands at 45 per cent female and 55 per cent male, compared to 43 per cent female and 57 per cent male across European financial services firms more broadly.

Data for North American firms shows that at the end of 2023, board-level female representation was nine percentage points lower than the UK, at 36 per cent female and 64 per cent male.

Twenty-one percent of UK financial services firms have less than 40 per cent female representation at board level – the same vs the end of 2023. In comparison, 28 per cent of European financial services firms have less than 40 per cent female representation.

UK non-exec directors are paid more than European counterparts, despite fall in overall pay levels

Total levels of remuneration fell across UK financial boardrooms fell between 2019 to 2023 but remained higher than European boardrooms in every year through the period.

In 2019, UK non-exec board directors were paid 27 per cent more than their counterparts in Europe more broadly. Boardroom remuneration across the sector in the UK averaged USD269,802 per director (on mean), versus USD212,360 across Europe’s financial boardrooms.

However, the pay gap between UK non-exec directors and their peers in Europe narrowed over the period. In 2023, UK non-exec board directors were paid 10 per cent more than their peers across Europe more broadly, earning USD266,368 versus USD242,715 respectively.

This is due to mean remuneration for UK non-exec directors falling by 1 per cent between 2019 and 2023, from USD269,802 in 2019 to USD266,368 in 2023, while over the same period, mean remuneration for non-exec directors across Europe rose by 14 per cent, from USD212,360 to USD242,715.

North American non-exec directors are paid more than UK counterparts

UK board directors were paid less than their North American counterparts in every year from 2019 to 2023, with the pay gap between the UK and North America widening over the period.

In 2019, North American non-exec board directors were paid 12 per cent more than their counterparts in the UK. Boardroom remuneration across the sector in North America averaged USD302,814 per director, versus USD269,802 across UK’s financial boardrooms.

In 2023, non-exec board directors across North American financial services firms were paid 26 per cent more than peers in the UK, earning USD334,707 per director versus USD266,368, respectively.

Female non-exec board directors at North American financial firms, who are paid less than their male peers in the region, still earn 8 per cent more than male non-exec board directors at UK financial services firms, according to the latest available data. In 2023, remuneration for female non-exec board directors at North American firms averaged USD324,250, versus USD299,076 for male non-exec directors at UK firms.

Non-cash remuneration, including equity and options awards, was found to be a major component of overall remuneration awarded to non-exec board directors across North American financial firms. It is a practice that is virtually non-existent across UK boards, as the country’s corporate governance codes discourages non-exec directors from receiving any variable pay in order to maintain independence and objectivity.

In 2019, 54 per cent of remuneration awarded to non-exec board directors across North American financial firms was structured in non-cash terms through equity or stock option awards, rising to 56 per cent by 2023. While UK non-exec board directors receive less remuneration overall, average fixed-fee compensation is much higher than that awarded to their North American counterparts. In 2023, the average fixed-fee compensation for North American non-exec board directors, excluding non-cash elements such as equity or stock option awards, was USD156,811, compared with USD266,368 for UK non-exec board directors.

European market comparisons in non-exec boardroom remuneration

Across European markets, non-exec directors at UK financial services firms were the third most well-remunerated in 2023, behind directors at Swiss and Spanish firms. On a median basis, UK directors were paid USD199,856 in 2023, with Swiss and Spanish directors receiving USD338,621 and USD252,570 respectively, on median.

Absolute levels of female remuneration across European markets follow a similar pattern. Female board directors at Swiss, Spanish and UK financial services firms received the highest overall pay in 2023, at USD254,732, USD246,491, and USD191,000, respectively. Female board directors at Norwegian, French and Swedish firms received the lowest overall pay on median in 2023, at USD60,141, USD86,184 and USD108,883, respectively.

At 11 per cent, the UK has a smaller gender pay gap on median than Switzerland (49 per cent), Denmark (27 per cent), Germany (20 per cent) and Italy (14 per cent), and a wider gender pay gap than Spain (7 per cent). Financial services firms based in Norway have the narrowest board-level gender pay gap, with female board members at Norwegian firms paid 25 per cent more than their male counterparts (USD60,141 for women on median compared to USD48,233 for men).

European sector comparisons

Within the UK financial services industry, non-exec directors in the banking sector were paid the most in 2023, at USD296,785 on median, followed by directors at UK insurers (USD191,000) and UK asset managers (USD135,000).

Within the European banking sector, UK non-exec directors received the second highest remuneration compared with other markets in 2023. On median, non-exec directors at UK banks were paid USD296,785 in 2023, behind only directors at Swiss banks, who were paid USD653,160 on median.

Within the European insurance sector, UK non-exec directors received the third highest remuneration compared with other markets in 2023. On median, non-exec directors at UK insurers were paid USD191,000 in 2023. This was behind non-exec directors at Swiss and Italian insurers, who were paid USD338,395 and USD205,780 respectively, on median.

Within the European wealth and asset management sector, UK non-exec directors received the third highest remuneration compared with other markets in 2023. On median, non-exec directors at UK asset managers were paid USD135,000. This was behind non-exec directors at Swiss and Dutch asset managers, who were paid USD235,138 and USD168,564 respectively, on median.

UK non-exec directors with c-suite or ESG skillsets earn the highest

Levels of remuneration across the UK’s financial boardrooms also vary according to directors’ skillsets and professional backgrounds.

Between 2019 and 2023, non-exec directors across the UK’s financial boardrooms with prior experience in a c-suite role were awarded higher remuneration every year. Most recently, in 2023, non-exec board directors with c-suite experience were paid an average of USD304,562, compared to USD258,190 to those without c-suite experience.

A similar trend is evident among board directors with sustainability expertise; in 2023, UK non-exec board directors with sustainability expertise were paid an average of USD365,884, compared to USD269,523 to those without sustainability expertise.

Omar Ali, EY Global Financial Services Leader, concludes: “The landscape for boardroom remuneration across financial firms in Europe is shifting, and compensation is a key consideration for chairs as they build and maintain their boards in an increasingly global industry. This is particularly the case as chairs of UK firms contend with the more lucrative packages offered in North America, which often include equity and options awards.

“Offering competitive – and importantly, equitable – pay is essential to ensure that boards are equipped with the skills and diversity necessary to navigate evolving market risks and challenges. A structured review of regional pay disparities – and the steps that can be taken to address them – is now integral to maintaining the strength of the UK financial services sector.”

More than half of managers (54 per cent) are currently using AI within their investment strategies or asset class research and that enthusiasm continues to grow with 37 per cent planning to use (37 per cent) that technology in the future AI, according to a 2024 Mercer global investment manager survey.

Generative AI (Gen AI), which consultancy EY describes as “the new poster child of AI applications [and] promises to deliver superior performance while executing information search, retrieval and synthesis tasks on unstructured content, along with content generation capabilities”, is among the most likely AI to join asset manager toolboxes.

The Mercer research shows that 26 per cent of asset managers currently use Gen AI while 51 per cent plan to do so in the future.

This comes as no surprise to Oliver Johnson, chief revenue officer at SaaS provider SimCorp, who says Gen AI has multiple functions for the buyside.

“AI in investment management isn’t new; we’ve seen hedge funds using the technology to help them make investment decisions for years. The main difference now is the steps that Gen AI has taken. It ultimately makes that technology more accessible, enhances productivity and supports multiple aspects of asset management.”

Johnson says the buyside is ‘on an AI journey’ starting with what he describes as ‘conversational AI’ moving to incorporating the technology into more complex investment decision making.

“Conversational uses Gen AI to ask questions and improve productivity, but you rely on your users to have some skills in prompting the AI. An example there could be, ‘tell me my exposure by geography or by sector and what are the biggest contributors to my portfolio?’. The answers can help inform decision making.”

Johnson adds that Gen AI is also helping investment managers process the plethora of reports they receive from multiple sources into a consistent digestible format.

“Asset managers get a lot of analyst reports but they’re not very good at storing those in consistent formats. AI gives the ability to pull a research report from various sources, collating the data and providing a report, which makes life more efficient.”

Johnson says more managers are moving to using AI as an assistant where it can perform autonomous tasks.

“An example there is asking AI to create a block trade or transactions or rebalance the portfolio. It’s still human led, but the technology can take a task through multiple workflow steps.”

This is especially useful, Johnson says in private markets, where investors receive capital calls in myriad formats.

“If you’re a big pension fund with 200 private equity fund managers, every single week, they get different call and distribution notices coming into different formats. Machine learning can take that data, even if it’s in a different kind of format, and create a transaction in the platform. Again, it’s an efficiency step,” he says.

More recently, SimCorp has been focused on taking asset managers into the more advanced stage of AI, which Johnson calls an autonomous copilot.

“This is where AI collaborates with the users, it anticipates needs and it’s more proactive than reactive. Rather than asking the AI to rebalance the portfolio, it would detect a cash injection and suggest a simulation of three different ways that you could rebalance your portfolio,” he says

The Mercer survey reports that a quarter of managers report using AI to support investment decision-making, broadening inputs to investment risk-management frameworks (21 per cent), and portfolio construction and rebalancing (18 per cent).

For asset managers concerned such technology looks as if it is becoming a threat to jobs, Johnson argues that humans are still needed to make the ultimate rebalancing decision.

“We strongly believe that technology is not going to replace portfolio managers. Technology is going to make them way more efficient, but it’s still going to be the human at the end that makes the call.”

He continues: “We all thought a few years ago we wanted autonomous driving cars but that hasn’t happened. I think it’s something similar here. I don’t imagine we would ever be in a regulatory or a social place where we don’t want humans making the investment decisions, we just want to help them make better ones.”

The firm writes that in 2024 gold saw substantial growth, reaching record highs amidst a backdrop of global instability and shifting economic and political conditions.

Paul Williams, Managing Director of Solomon Global, the specialist supplier of LBMA-approved gold and silver bars and coins, explores the key factors behind gold’s surge and how, in 2024, the precious metal reaffirmed its role as a trusted store of value in volatile times. Looking to 2025, Williams offers insights into what could shape gold’s future trajectory amidst ongoing global challenges.

Gold’s meteoric rise in 2024

The gold price surged by 27 per cent in 2024, closing at USD2624.49 per troy ounce on December 31st. The firm writes that the ‘barbarous relic’ hit 39 all-time highs (dollar) over the year, representing a historic milestone and surpassing previous records set during other periods of economic and geopolitical instability.

“The rise was driven by a complex interplay of global factors that underscored gold’s enduring role as a safe-haven asset. Despite the Fed halving its forecast on the size of rate cuts in 2025, the main demand or price drivers that propelled gold to record highs throughout 2024 are likely to continue this year,” the firm says.

Geopolitical tensions fuelling demand

The continuing conflict between Russia and Ukraine, compounded by mounting tensions in the Middle East, saw investors flee to gold, traditionally seen as a stable store of value during times of conflict. Sadly, the firm writes that there seems little hope of a diplomatic solution to the intensifying situations in Ukraine or the Middle East, and 2025 could even see an escalation.

Continued demand from central banks and emerging markets

Gold is seen as a reliable reserve asset, and many global central banks increased their gold holdings over 2024. The firm says that nations like China, Russia, and Turkey ramped up their gold reserves, seeking to reduce dependence on the US dollar amid an increased move to de-dollarisation. This trend looks set to continue, or even increase, as more banks diversify from US treasuries, and could provide further upward momentum for gold. Additionally, rising wealth in emerging markets continues to drive demand, especially during economic or political uncertainty. This strategic move by central banks underscored a broader shift in the global financial system.

Inflation and economic concerns

The global outlook remained uncertain in 2024, with inflation fears persisting in major economies. While the US Federal Reserve and other central banks made efforts to control inflation through interest rate adjustments, the impact of rising costs of living and wage pressures continued to weigh on consumer sentiment.

The firm writes that gold’s traditional role as a hedge against inflation drew investors as they sought a safer alternative for preserving wealth. If economic conditions worsen in 2025, leading to a global slowdown or recession, investors will likely continue flocking to gold. Weak economic data or slowing growth could support higher prices. The potential for a return of rising inflation will continue to influence gold’s price.

UK Perspective: a new Labour government and the pound’s volatility

The incoming Labour government’s focus on fiscal responsibility and wealth redistribution led to fears that higher CGT rates could be introduced to fund public spending. The firm writes that this speculation prompted a surge in purchases of legal tender gold coins, which are exempt from CGT. The Royal Mint reported a sharp increase in demand for these coins in the third quarter of 2024 with revenues increasing by 110 per cent from July to September 2024 (compared to the same period of 2023).

Political uncertainty also contributed to volatility in the pound. While the pound’s performance remained relatively strong early in the year, concerns about Labour’s economic policies following Rachel Reeves’ maiden budget on October 30th contributed to sterling recording its longest stretch of weekly losses in almost six years, the firm says.

A weaker pound typically translates to higher gold prices for UK investors, as gold is priced in dollars. This currency dynamic meant that UK-based gold holders enjoyed amplified returns when the pound dipped against the dollar.

All-time highs, investor sentiment and gold’s continued appeal

Throughout 2024, gold prices tested new highs, reflecting broader market anxieties. The psychological threshold of USD2,500 per ounce was breached in August for the first time as a combination of geopolitical events and economic uncertainty converged, and the precious metal reached its highest price ever on October 30th, when it traded for a record-breaking USD2790.07. Despite a pullback from this level, investor sentiment has remained bullish.

Whilst there are potential headwinds for gold, including a more Hawkish Fed, a myriad of factors could provide further upward momentum for the metal in 2025, the firm says.

“Central banks look set to continue their gold-buying trajectory; the Central Bank of China – the world’s second-largest economy – resumed gold purchases in December for the first time in seven months. The macroeconomic outlook still looks weak; geopolitical uncertainty persists, as do high global debt levels and long-term inflationary pressures. Trump’s tariffs, far from being detrimental, could support gold. “The costs of tariffs, essentially taxes on imported goods, are often passed down to consumers as higher prices. For gold investors, such policies present unique opportunities, primarily because tariffs often create economic uncertainty and inflationary pressures—two conditions under which gold historically thrives.”

“2024 underscored gold’s timeless role as a safe-haven asset. In a world grappling with geopolitical conflicts and economic uncertainty, gold has provided stability and security for investors,” says Williams. “The record highs achieved this year reflect not just market conditions but also a broader sentiment of caution and hedging against risk. This context looks set to continue in 2025.”

This figure exceeds the market capitalisation of listed real estate (USD1.9 trillion) and broad commodities (USD1.0 trillion), and rivals other well-established categories such as emerging markets small cap equities (USD2.8 trillion), high yield bonds (USD2.8 trillion), and inflation linked bonds (USD2.6 trillion), Silenskyte writes.

Cryptocurrencies now boast a 15+ year track record, evolving from bitcoin’s debut in 2009 to a thriving ecosystem of thousands of digital assets and blockchain-based applications. This longevity and growth underscore their resilience and staying power, WisdomTree says.

Investor sentiment

Despite these achievements, scepticism persists. WisdomTree writes that according to its 2024 Professional Investor Survey, approximately 15 per cent of respondents see lack of demand for cryptocurrencies, and just over 13 per cent of them still view cryptocurrencies as a passing fad.

“This scepticism overlooks several significant milestones in cryptocurrencies’ journey towards mainstream finance and institutionalisation that we have observed in 2024. By way of example:

“Spot bitcoin ETPs launched in the United States and received over USD24 billion in net inflows during the first 10 months of 2024.

“Major institutions, including the State of Wisconsin Investment Board and Emory University Endowment, allocated to bitcoin ETPs, citing inflation-hedging properties and potential for portfolio diversification.”

WisdomTree notes that while the majority of 2024 flows have gone into US-domiciled spot bitcoin ETPs, Europe remains a leader in the diversity and maturity of its offerings.

“Here investors can invest in a broad range of single-coin and crypto basket ETPs, many of which boast relatively long track records.

“Europe’s foresight has fostered a sophisticated market that spans diverse strategies and caters to varying investor preferences. In contrast, the US market, although gaining momentum with recent launches, continues to play catch-up.”

Looking ahead

The evolution of the crypto ETP market is expected to accelerate as both the US and European markets continue to mature, the firm writes.

“In the US, the recent launch of spot bitcoin and Ethereum ETPs could pave the way for regulatory approval of additional cryptocurrency products, broadening the scope of investment opportunities available to institutional and retail investors. This growing accessibility is likely to attract even greater inflows, further embedding cryptocurrencies within the traditional financial ecosystem.

“Meanwhile, Europe’s established leadership and diverse product offerings position it to remain a hub of innovation in the crypto ETP space.”

Bitcoin ETPs are now listed in most developed markets, providing institutional investors across the globe with streamlined access to cryptocurrencies, the firm says. “This widespread availability not only enhances portfolio diversification opportunities but also fosters greater adoption by institutional players who were previously deterred by the complexities of direct cryptocurrency investment.”

Conclusion

Silenskyte writes that the data highlights a disconnect between the market reality of cryptocurrencies and the perceptions of some investors. “With a market capitalisation rivalling traditional asset classes and a proven history, cryptocurrencies are no longer a niche investment but a formidable player in the global financial ecosystem.

“For investors dismissing the sector as a passing trend, it may be worth reevaluating their stance in light of the evidence.”

The association writes that demographic shifts, underfunding of defined benefit pension plans, inflation, rising inequalities, and gaps in financial literacy, are creating an increasingly complex pensions environment and more risk of pension inadequacy for retirees.

The research, “Pensions in the Age of Artificial Intelligence,” explores whether technology can offer solutions to address key issues across various parts of the value chain in pension management. It includes case studies and expert interviews from markets including Australia, Japan, the United Kingdom and the United States, and surfaces examples of where the integration of new technology can empower pension trustees as well as beneficiaries to make better informed decisions.

Olivier Fines, CFA, Head of Advocacy for EMEA at CFA Institute, comments: “AI can add more than just operational efficiencies. From onboarding new members to account management, plan governance, investment management, and decumulation strategies, AI and machine learning can play a positive role in addressing key issues facing the pensions industry. However, transparency and robust governance in the use of the technology will be vital to build trust and rapport with pension plan members.”

“As investment firms and plan sponsors increasingly integrate the technology in their processes, collaboration with technology providers and regulators will be important to ensure that workflows consider the specifics of individual pension plans, and respect their operating models, fiduciary duty, and the regulatory framework they operate in. This is why we believe AI should support, not replace, human decision-making and why it will be critical to set clear objectives and benchmarks for evaluating model effectiveness.”

“AI and machine-learning technologies may allow providers to offer more personalised services and dynamic support for plan members. We believe AI should play a major role in balancing personalisation and simplicity, accounting for individual needs and varying levels of financial literacy. This should foster increased member engagement and promote financial wellness. AI can also assist trustees and advisors in navigating the crucial decumulation phase for plan members.”

Key Findings:

·       Enhancing Personalisation, Efficiency, and Accuracy: AI applications are diverse and consideration must be given to how to best use AI to enhance overall retirement security for pension plan members. Enhancements will require targeting specific areas of the pension ecosystem that will contribute the most value for the unique needs of each pension fund.

Member Engagement and Financial Literacy: Implementing AI for member onboarding, communications, reporting, and retirement planning could enhance overall member engagement, boost financial literacy, and support pension plan members throughout their retirement life cycle.

Pension Plan Governance: AI technologies can enhance pension plan governance by facilitating multi-stakeholder interactions, reducing administrative tasks, and aiding pension boards with decision-making. This includes improving optimisation of investment strategies and prompt resolution of member issues.

Investment Management: AI and machine learning models can boost the analytical capacities of portfolio managers, enhance actuarial analyses of pension fund risks, and keep market trend assessments up to date. These technologies may be especially useful for analysing private markets and data related to sustainable investments.

Predictive Analytics and Actuarial Assumptions: Advanced machine-learning techniques may enhance actuarial assumptions and predictive analytics, improving asset/liability management and pension derisking strategies. Defined contribution plans may benefit from personalised strategies across the lifecycle of each individual investment plan, with accumulation and decumulation strategies based on member behaviour predictions.

The London-based manager founded by alumni of Bankers Trust, Goldman Sachs and JPMorgan, writes that it has seen a huge uptick in inquiries from existing investors and first-time institutional investors since the US Election results and Bitcoin hitting a new high of USD107,000 as of 16 December 2024.

Nickel writes that its flagship fund, Diversified Alpha, a quant multi-PM fund, fuelled by a record YTD performance of over 30 per cent, has seen a 115 per cent increase in AUM since the beginning of the year with a particularly huge uptick in inquiries from prospective investors following the November 5th US presidential election.

The surge in inquiries comes predominantly from institutional investors with no previous allocations to the digital assets, reacting to prices in bitcoin exceeding USD100,000 milestone, the firm says, adding that it reached USD107,000 on 16 December and has gained over 150 per cent year to date.

Nickel Digital research in June this year found that while almost all (97 per cent) institutional investors and wealth managers surveyed expected bitcoin to surpass the USD100,000 landmark at some stage, however just one in five (20 per cent) expected that to be achieved within two years. Around two out of five (39 per cent) said it would take three years or more to hit USD100,000.  This year’s development, however, has exceeded even the most optimistic expectations, the firm writes. 

Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, says: “The bitcoin bull market is here and BTC price point exceeding USD100,000 is seen by many as validation of bitcoin long-term value proposition.

“It is not just the USD100k landmark that sparks the renewed interest – there is a dramatic change in attitude among institutional investors driven by the anticipated changes in regulatory environment in the US but also gradual recognition of the role of digital assets in institutional portfolios.

“Statistical evidence shows that incorporating a small proportion of digital assets results in a significant positive effect on a multi-asset portfolio, without materially impacting the portfolio’s risk profile. The fluctuating relationship between equities and digital assets means that an allocation to the asset class enhances portfolio diversification.”

Institutional Asset Manager’s sister title, ETF Express, has recently launched a monthly cryptocurrency column, in partnership with Trackinsight and CoinDesk. Follow this link to read more.

Europe will spearhead this growth, with the region expected to drive a CAGR of 29 per cent. The phased implementation of the CSRD, along with complementary measures such as the EU Corporate Sustainability Due Diligence Directive (CSDDD), will drive rapid adoption among over 50,000 EU firms and more than 1,000 non-EU organisations.

North America and Asia are also set for strong growth, with CAGRs of 25 per cent and 24 per cent, respectively, as US firms look to tackle changing international, federal and state-level ESG reporting commitments and in Asia, the adoption of the International Sustainability Standards Board (ISSB) standards gains traction.

Manufacturing and wholesale and retail trade are forecasted to see the highest growth rates among industries, with CAGRs of 28 per cent and 29 per cent, respectively. These sectors, which have highly complex supply chain networks, face increasing pressure to provide holistic and high-quality, auditable data. This is driven by regulatory requirements, and sector specific supply chain legislation such as the EU CSDDD, the US Uyghur Forced Labor Prevention Act (UFLPA) and the Australian Modern Slavery Act.

Kim Knickle, Research Director of the ESG & Sustainability practice at Verdantix, comments: “Global ESG reporting software spend is projected to surge, peaking between 2026 and 2028, before stabilising. Over 50,000 firms globally are facing imminent sustainability reporting deadlines such as the CSRD, with significant risks of non-compliance, driving demand.

“As businesses face ever-evolving complexities, robust, adaptable reporting technologies are critical to ensure transparency, build stakeholder trust and maintain a competitive edge. Beyond compliance, firms are using ESG reporting and data management tools to enhance decision-making, improve efficiency, and manage risks – which is driving the involvement of a more diverse set of stakeholders, like finance and compliance teams. As adoption accelerates, these systems will become integral to how businesses operate in an evolving sustainability landscape.”

For its latest report – Supermodel: the great evolution in asset management – Carne surveyed 200 executives from asset managers representing a combined USD15.98 trillion in assets under management (AUM) on the commercial pressures that their businesses are set to face in the coming two years.

When asked to identify the strategies being prioritised for revenue growth over this period, 40 per cent identified developing new funds in core private asset classes as a high priority for their firm.

However, broadening access to private markets is proving both an opportunity and a challenge, with 37 per cent of managers ranking the development of new funds in core private asset classes as one of the most difficult strategies to support.

Speed to market suffering in race against time

With investable assets being significantly reallocated to private markets, managers who can bring competitive products to market quickly will be best equipped to seize this growth opportunity.

However, entering unfamiliar regulatory territory with debut products is a complex undertaking for the in-house management functions tasked with delivering on this agenda. Over half (55 per cent) of asset managers cite the development of funds in new asset classes as their most challenging growth strategy.

Legal and regulatory administration as well as due diligence of distribution partners are rated as the least efficient parts of the process, placing the greatest strain on already stretched in-house resources.

As a result of this complexity, speed to market is slowing, with 63 per cent of managers stating that a typical fund launch now takes 10 months or longer. With private markets AUM projected to reach more than USD15 trillion by 2025 and more than USD18 trillion by 2027, speed to launch will be critical for asset managers in order to capitalise on the allocations shift currently underway across the industry.

Industry turning to third-party specialists to support expansion into new product areas

In order to solve this cost/growth conundrum, asset managers are increasingly looking to outsource management company (ManCo) responsibilities to external specialists – unlocking access to dedicated expertise that can expedite the regulatory approval process, execute on new reporting requirements, and enable greater speed to market.

Taking the Luxembourg market as an example – a key domicile for alternative funds – PwC’s 2024 Barometer shows that the proportion of AUM managed by third-party ManCos relative to the market’s total AUM has continuously increased in recent years, growing from 6 per cent in 2018 to 18 per cent in 2023, the firm writes. This has coincided with significant growth in alternative investments as a proportion of Luxembourg ManCo AUM, with non-regulated AUM achieving a compound annual growth rate of 57 per cent since 2018 – vastly outpacing regulated AUM at just 8 per cent.

According to Carne’s research, this trend towards outsourcing is set to continue across the industry. Among those surveyed, more than half (51 per cent) of asset managers with proprietary in-house management companies plan to outsource more specific functions to a third-party ManCo over the next two years – with regulatory reporting (41 per cent), sustainable investment support functions (39 per cent) and distribution (37 per cent) among the most commonly cited areas for outsourcing.

Almost a third (29 per cent) of firms expect to outsource ManCo responsibilities specifically to support new products, while 19 per cent expect to fully outsource ManCo functions to a third-party provider over the next two years.

Commenting on the findings, John Donohoe, CEO and Founder at Carne Group, says: “The widespread reallocation of assets to private markets is creating a pivotal land grab opportunity for asset managers who can service this demand with competitive products brought to market quickly. Private market funds have the potential to offer managers much higher revenue than the margin-constrained, fee-bound products in the actively managed equity and fixed income universe, making this an opportunity that many managers simply can’t afford to miss in a cost-constrained environment.

“However, the complexity of launching new private markets funds means that, the faster an asset manager wishes to grow, the greater the operational challenges that arise. Our research, as well as our experience of evolving client needs and challenges, suggests that the growth in alternatives is intrinsically linked to the growing appetite for outsourced solutions, which are guiding asset managers through complex regulatory processes and helping them to expedite these products’ route to market.”

The report explores the role of long-term investors in the green energy transition and notably finds that global private investments into the infrastructure underpinning the energy transition increased more than eightfold between 2010 to 2023, from USD73 billion to USD604 billion.

Sovereign wealth funds (SWFs) are increasingly investing in the green energy transition, with renewable energies topping climate investment priorities (USD5 billion poured into renewable energies in 2023 – up from USD3 billion in 2022) – while investments in EV and batteries shot up to USD2.78 billion from negligible amounts in 2022.

SWFs are increasingly paying attention to climate-related risks and opportunities within their portfolios – 34.5 per cent have already assessed the carbon footprint of their whole investment portfolio, while 41.4 per cent are already in the process of doing so.

While SWFs are increasing their green energy transition investments, the world faces a major shortfall in funding overall – in 2023, only 0.4 per cent (USD2.9 billion out of USD729 billion) of global investments into energy transition infrastructure came from SWFs and PPFs.

Only around USD236 billion (out of USD1.7 trillion) in energy-transition related investments in 2023 went to emerging markets and developed economies.