Global, 10 September 2018 – Asset owners looking to succeed in a world of substantial changes in technology, demography, globalisation, environment and social norms will need to significantly reposition their business, operating and investment models, according to new research from the Thinking Ahead Institute.
In its paper, ‘The asset owner of tomorrow’, the Thinking Ahead Institute addresses four key challenges faced by asset owners and how these trends might ultimately shape their journey in the next 5-10 years.
Roger Urwin, Global Head of Investment Content at Willis Towers Watson and the principal author of the paper, said: “Being an asset owner can be incredibly complex and we don’t expect life in the next ten years to become any easier. It starts with a clear definition of what we mean by the term “asset owner” – these are the institutions that manage collective savings of over US$50tn under discretionary and fiduciary responsibility. The size of their assets and their influence make asset owners too important to fail in their mission. Central to the practical steps outlined in this report will be an overarching need for asset owners to better understand the world in which they operate, if they are to manage risk, exploit opportunities and thrive through the Great Acceleration*.
The paper outlines the four big shifts in response to the Great Acceleration in coming years:
1. Shifting common approaches to professionalism:
Asset owners must shift from a focus on performance and towards professional accomplishments, acknowledging their wider public duties as well as taking a longer-term view of their capital allocation and ownership responsibilities.
2. Increased adoption of systems and automation to enhance decision-making:
Successful asset owners will become more efficient in handling big data and marshalling computer-based technology alongside human technology in order to create opportunities for networked thinking.
3. Using culture and diversity to further evolve the people model:
Asset owners have typically not enjoyed a significant history of strong leadership, thereby reducing the competitive advantage an effective culture adds. In particular the need for greater diversity arises including ‘identity diversity’ but going beyond that into ‘cognitive diversity’ as well.
4. Rethinking the investment model:
To respond effectively to the multiple problems of applying modern investment thinking, investment models must take into account increasingly sophisticated risk and return systems and methods, whilst developing sustainability practices in a more centrally-managed way.
“All situations for asset owners are different and the art to their future success will be understanding and evolving best practise principles and applying them to unique circumstances. As a result, there is an overarching need for them to understand the world in which they operate through a model that connects all the dots,” Urwin added.
“Our analysis is particularly relevant for de-risking funds, which have relatively short investment horizons. The asset owner of tomorrow will have to focus on multiple time horizons.
“There are big opportunities called out for asset owners from this research to embrace the shift towards stronger professionalism in their business models and achieve better differentiation.”
*The term was first used in a working group of a 2005 Dahlem Conference on the history of the human-environment relationship (Hibbard et al., 2006) and subsequently popularised in Robert Colvile’s book ‘The Great Acceleration’.
About the Thinking Ahead Institute
The Thinking Ahead Institute is a global not-for-profit member organisation whose aim is to influence change in the investment world for the benefit of savers. The Institute’s members comprise asset owners, investment managers and other groups that are motivated to influence the industry for the good of savers worldwide. It has 45 members with combined responsibility for over US$12 trillion and is an outgrowth of Willis Towers Watson Investments’ Thinking Ahead Group.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has over 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.