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Challenges and Opportunities: The Asset Management Sector in 2024

The asset management sector is on the brink of a transformative era. With rapid changes in regulations, geopolitical dynamics, and the emergence of generative AI (GenAI), asset managers are facing both challenges and opportunities. As...

The asset management sector is on the brink of a transformative era. With rapid changes in regulations, geopolitical dynamics, and the emergence of generative AI (GenAI), asset managers are facing both challenges and opportunities. As we embark on the journey that is 2024, let's take a closer look at three key areas that will shape the industry.

Possible Rate Cuts

For years, asset managers have operated in a low-rate environment. However, the sudden increase in rates in 2022 and 2023 forced them to swiftly adapt. Now, the Federal Reserve has hinted at possible rate cuts in 2024. According to a recent survey conducted by KPMG, a majority of asset managers anticipate rate cuts in the second half of this year or even earlier.

The market has been eagerly waiting for a signal that rates will not increase further to spur transaction and deal activity. The possibility of interest rate cuts in 2024 creates a more favorable environment for asset managers. Interestingly, the survey also revealed that asset managers are more concerned about the trajectory and timing of interest rates rather than the actual level.

Asset Management Image source: KPMG

Realizing Benefits of GenAI, Addressing the Learning Curve

The impact of emerging technologies like GenAI is still being comprehended across all industries, and asset management is no exception. While the long-term implications remain uncertain, one thing is clear – GenAI is here to stay. However, there is a significant gap between the expected utilization of GenAI and the comfort level with the technology among asset managers.

According to the survey, only 20% of asset managers feel adequately knowledgeable about the use of GenAI, despite 30% anticipating its utilization for 5-20% of tasks by the end of 2024. This highlights a pressing need to bridge the skill gap and empower asset managers to leverage GenAI to its fullest potential. Investing in, deploying, and upskilling professionals in emerging technologies ranked as the highest strategic priority for 65% of respondents.

Talent Risk and the Rise of Hybrid Work

Attracting and retaining top talent has always been crucial for asset managers, but in today's hybrid work environment, it has become even more challenging. The survey uncovered concerns about talent risk, encompassing leadership, recruitment, retention, and cultural issues. Interestingly, smaller organizations face the greatest challenges in this aspect.

Apart from talent management, asset managers are reevaluating their working environment strategies. The survey revealed that 67% of organizations have implemented hybrid work arrangements, indicating that this approach is here to stay. Only a quarter of respondents have returned to the office five days a week. This shift underscores the need for flexibility and adaptability in the asset management industry.

The Path Ahead

The last few years have taught us that the road ahead is unpredictable. As we delve further into 2024, one thing is certain – change will continue to shape the asset management industry. The successful organizations will be those that embrace short-term challenges, evolve with the times, and maintain focus on their long-term objectives.

Roger Yang, KPMG's Asset Management Practice leader for Pacific Southwest markets, guides professionals through this ever-changing landscape. To stay at the forefront of asset management, visit kpmg.us.

Image Source Caption: The asset management industry faces challenges and opportunities in 2024. Image source: KPMG

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