Management companies: 4 major results of Covid-19

in Industry Insights, 03.06.2020

During a recent KPMG webinar, asset management experts shared their views on the impact of the Covid-19 crisis. Let’s look at the key takeaways from that discussion.

1) Working from home

The most visible impact was an immediate, all-staff shift to working from home. This change, combined with the activation of BCP plans, proved successful with no significant disruptions. Leading, high-profile service providers were able to provide continued quality services. Activating the BCP, however, did not equate to business as usual from home. It introduced new issues: access to IT infrastructure for a high volume of people across numerous locations and a flexible approach to working as employees simultaneously cared for their families. Last but not least, it brought a wave of urgent tasks related to liquidity management, valuation, enhanced oversight activities for delegates and closer communications with service providers and delegates.

2) Business challenges

All actors responded to the crisis with a high level of maturity, but their main challenges revolved around valuation and liquidity management, given the volatile markets. Every fund type, be it alternative or UCITS, was hit with valuation issues requiring a swift change of approach and resulting in new committees to perform additional valuation reviews. Liquidity measurement became critical and liquidity management tools were activated as necessary. We noted two key shifts in attitude: (1) Regulators worked more closely with management companies than ever before, and (2) liquidity management tools shed their negative reputation among clients and regulators.

3) Anticipated product changes

There is a consensus that, following the crisis, the focus on ESG strategies will grow. Products that mix various asset classes while offering liquidity may have a bright future. In that respect, organizations could differentiate themselves from more specialized competitors by managing various asset classes under one roof. More opportunistic strategies will emerge as investment funds invest in the economy, supporting it in a way that banks are no longer able.

4) Future industry changes

The post-crisis operating models of management companies will likely undergo significant changes. This may include the long-term adoption of working from home paired with new ways of communication and other technological developments that meet changing operational needs. We might also see the industry reassess the use of concentrated offshore support and the value of active versus passive management. Will those changes materialize? Only the future will tell.