ASSET and wealth managers will need to seek investment opportunities in niche areas such as peer-to-peer lending if they are to prosper, PwC has claimed.
In a new report, titled ‘Asset & Wealth Management Revolution: Embracing Exponential Change’, the accountancy firm noted that the industry has remained fundamentally the same since the 1990s, but warned the next decade will see it “substantially reinvented” with the sector no longer able to get by as a “digital technology laggard”.
PwC said that asset and wealth managers have been filling the financing gaps that have emerged since the financial crash, as well as investing in real asset classes.
“To generate alpha, their involvement in niche areas such as trade finance, P2P lending and infrastructure will dramatically increase,” the report said.
The report identified “huge financing needs”, with a particular shortage of funding for small- and medium-sized businesses, as banks have pulled back in the wake of regulatory and capital restrictions.
Elsewhere, the report predicted harder times ahead for passive investments, noting that they offer “no downside protection”.
“As quantitative easing declines, there will be greater dispersion, leading to a greater emphasis on active stock selection and asset allocation,” the report said.
“And as passive management takes greater market share, so the relationship between a company’s fundamental strengths and its stock price is likely to weaken, leading to inefficient markets that active managers can exploit.”
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