Driving asset owner innovation and excellence
Key insights from the world's leading asset owners
Asset owners are prioritizing the development of scalable operating models that maintain sustainable costs. This is driven by factors such as higher inflation, rising data costs, the compounded impact of legacy systems and a shift towards more passive strategies and higher allocations to private markets.
Together with Dr. Ashby Monk, Executive and Research Director of Stanford Research Initiative on Long-Term Investing (SLTI), the 2024 BNY Asset Owner Innovation Summit provided a platform for global leaders in the asset owner industry to share their collective wisdom and experiences in navigating the complexities of today's business environment while focusing on remaining at the forefront of innovation.
Strategic Imperatives for Asset Owners
To gain a deeper understanding of client trends and challenges facing asset owners, a survey1 was conducted to benchmark operational excellence across regions Asia-Pacific, Europe/United Kingdom, Middle East and North America and firm types, including central banks, corporate and public pensions, sovereign wealth funds, and superannuation funds. The survey, which was also conducted in 2023, aimed to highlight the shifts in priorities, challenges and trends in operating model transformation.
The survey results revealed that clients are increasingly prioritizing investments in data management, governance models and technology. This focus is driven by the need to balance cost pressures with execution priorities, particularly in the realm of outsourcing technology development. Integrating new technologies and associated processes, as well as data integration and analytics, were identified as key priorities.
In an era where complexity challenges growth, asset owners are rewriting the playbook for operational excellence. By integrating scalable models, data-driven strategies, and emerging technologies, they are not just adapting to change—they are shaping the future of investing. The key? Innovation paired with precision, where every decision is a step toward sustainability and resilience in the face of rising global demands.
Dr. Ashby Monk, Executive and Research Director of Stanford Long-Term Investing
Three Strategies for Operational Excellence
As asset owners look to the future, the focus on data management, technology investment and operational efficiency becomes even more acute to adapt to evolving market demands and achieving operational excellence. Through the synthesis of insights from the summit and survey, three key areas emerged as crucial for asset owners achieving long-term success.
1. Optimizing Operational Efficiency Across Public and Private Markets
Transformation is ongoing. Eighty-five percent of survey respondents are undergoing or seeking to undergo operating model transformations, a 22% increase since 2022.2
Specifically, as asset owners’ private markets allocations continue to grow, inherent operational challenges such as data availability, total portfolio reporting across public and private markets, and separate front office systems are becoming more acute.
Survey Insights:
- Operating Efficiency: Close to two-thirds (62%) of survey respondents rated their organization’s current operating efficiency as “efficient” or “very efficient.”
- KPI: A majority (70%) of respondents have no leading KPIs to assess operational efficiency.
- Operating Model Transformation: A significant portion of the respondents (85%) are currently undergoing or seeking to undergo an operating model transformation.
Key takeaway: Maintaining a set of leading operational efficiency KPIs and an annual operating budget as a percentage of assets under management (AUM) is arguably crucial to making informed decisions, allocating resources effectively, ensuring compliance and supporting long-term sustainability. Outsourcing certain in-house functions can also enhance efficiency with private markets as a growing area of focus given the inherent complexities.
As private markets allocations increase, there is an increased demand for analytics across public and private markets. This will be enabled by the emergence of greater standardization of data (e.g., valuation) across the private markets ecosystem — for both general partners (GPs) and limited partners (LPs) — including asset owners.
Sahil Bhandari, Managing Director, Growth Ventures, BNY
2. Advancing Data Management, Governance and Analytics
Data management plays a vital role in driving investment strategies and running effective operations. Our survey shows that asset owners have prioritized investments in technology over the past two years, with a balanced approach to data governance. Despite this, there is a need for better talent and training to fully leverage advancements in data solutions.
Survey Insights:
- Third-Party Data Governance Platform: Close to two-thirds of the respondents (62%) use a third-party data governance platform.
- Internal Data Platform: The same percentage of respondents (62%) have built an internal data platform.
- Operating Model Challenge: Data integration and analytics (35%) are the main challenges asset owners face within their current operating models.
Key takeaway: Prioritizing the integration of vendors, partners and service providers helps to streamline data flow. Investing in robust data governance platforms, whether third-party or internally built, can help manage and analyze data more effectively.
Asset owners need to make data work better for their business to drive their investment strategies and unlock portfolio returns. Solving this complex supply chain challenge effectively requires an investment in data management technology that is fit for purpose, can scale as the business grows and delivers innovative capabilities to improve operational efficiency and drive decision-making.
Julie Gerdeman, Global Head of Data & Analytics, BNY
3. Harness Emerging Technologies
Embracing innovation and identifying the right use cases for new technologies can significantly improve investment outcomes and operational efficiency. Attendees of the 2024 BNY Asset Owner Innovation Summit agree that emerging technologies should be prioritized but caution that innovation without compliance and proper processes can be risky. Attendees also believe collaboration with peers can expedite decisions on using modern technology. In the pension sector, attendees expressed some concerns that start-ups focus too much on mass-consumer technology, rather than solutions targeting asset owners. While acknowledging the value of fintechs, they note that engagement processes are inconsistent but can reap benefits to improve efficiency.
Survey insights:
What percentage of your internal technology budget is allocated to “build” (e.g., new user tools, emerging technologies) vs “run”?
Key takeaway: Technology is playing an increasingly important role in improving operational efficiency and investment outcomes for asset owners. For example, technology can help firms automate routine tasks to focus on high-value activities. Additionally, leveraging advanced analytics with real-time insights can help to better inform investment decisions and manage risk. However, embracing technology must be balanced by identifying the right use case and ensuring proper due diligence and data governance to mitigate risk.
To learn more about the best practices and strategies for asset owners, visit the BNY Asset Owner Academy.
1 2024 BNY Survey, July 2024
2 This data was captured in both the 2022 and 2024 BNY Asset Owner Survey and reflects the increase between 2022 and 2024.
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