The Evolution of Asset Management: Industry Trends in 2025

Driven by technological advancements, changing investor preferences and an increased focus on sustainability, the asset management industry is poised to undergo a substantial shift in how investments are managed, distributed and tailored to individual needs.

The trend towards customisation and hyper-personalisation in asset management is set to accelerate, with a marked shift towards bespoke investment solutions. 

A recent survey by Deloitte found that 76% of asset managers expect to increase their offerings of customised products over the next three years.

Matt Ford, Co-founder and CEO at Sidekick, explains: "We expect the shift to a more client-centric approach in the asset management industry to continue in 2025 and beyond, as high net worth and mass affluent individuals increasingly demand more than off-the-shelf products."

This evolution extends beyond traditional risk profiling and portfolio matching. Matt elaborates: “What the industry calls customisation will also continue to evolve from simply assessing investor risk profiles and matching them to suitable diversified portfolios, to hyper-personalised individual portfolios at scale enabled by technology.”

The manifestation of these tailored solutions is expected to be diverse.

“These products will range from ESG customisation or negative screenings of popular indices, to more custom indexing, tax alpha through tax loss harvesting and efficiently managing concentrated positions,” predicts Matt.

This shift towards hyper-personalisation is not merely a trend but a response to changing investor demands. 

As investors seek portfolios that align more closely with their specific financial goals, risk tolerances and values, asset managers are compelled to adapt their offerings.

The move towards customisation is further facilitated by advancements in technology, particularly in artificial intelligence (AI) and machine learning (ML). 

Jamil Jiva, Global Head of Asset Management at Linedata, highlights the transformative potential of these technologies.

He says: “Artificial intelligence enables investment managers to source a wider amount of information faster to identify early signals to either invest earlier in successful companies, leave earlier if a company faces challenges or avoid companies that would result in losses for them.”

Jamil further notes that AI can significantly reduce the time required to analyse a company from publicly available data, “from a few hours to less than an hour”. This efficiency gain allows for more comprehensive and timely investment decisions.

The digital revolution in distribution

The asset management industry is undergoing a significant shift in its distribution strategies, with a move towards more digital and direct-to-consumer channels. 

A survey by PwC revealed that 91% of asset management executives plan to transform their product distribution strategies in the coming years.

This transformation is driven by the need for greater efficiency and the changing preferences of investors. 

Digital distribution is expected to reduce costs by minimising reliance on intermediaries, allowing asset managers to reach a broader audience at a lower cost. 

It also provides opportunities for more targeted marketing and personalised communication, leveraging data analytics to tailor messaging and product recommendations to individual investors' preferences and behaviours.

Boris Redfern, emphasises the importance of the human element in investment management: “The investing business is a people business first and foremost. The true added value of investment advice is the trust between client and advisor and this can even outweigh net performance in terms of importance to some investors, especially older investors.”

However, Boris also acknowledges the role of technology in streamlining operations. 

He outlines several ways in which robo-advisory services can enhance investment management: “Robo-advisors provide automated, personalised financial advice using algorithms that assess individual investor profiles, goals and risk tolerance, enabling investment managers to deliver tailored recommendations efficiently and at scale.”

On asset allocation, he adds: “These services use advanced algorithms to determine optimal asset allocation based on an investor's risk profile and investment horizon, ensuring a diversified portfolio that aligns with the client's objectives without requiring manual intervention.”

The integration of ESG and sustainability

As environmental, social and governance (ESG) considerations continue to gain prominence, asset managers are under increasing pressure to integrate these factors into their investment processes. A study by Preqin found that 77% of hedge fund managers expect ESG to play a more significant role in their investment decisions by 2025.

“ESG is an important topic but one that remains in flux from a regulatory point of view,” says Matt. 

“Therefore it's important for hedge funds and asset managers in general not to get carried away with their sustainability claims. Instead, focus should be on having robust processes that go beyond simply relying on the ESG providers' risk scores.”

Matt emphasises the importance of ESG in the due diligence process, saying: “ESG will increasingly become an important part of the due diligence process, which is where active managers like ourselves can make a difference not only by delivering alpha but also by identifying those companies that are set to contribute the most to a sustainable future.”

To meet heightening ESG standards, asset managers must develop robust ESG policies and frameworks to guide their investment decisions. This involves creating clear criteria for evaluating companies' ESG performance and integrating these factors into their risk assessment models.

The expansion of alternative asset classes

Alternative asset classes are poised for significant growth heading into 2025. A report by Preqin projects that alternative assets under management will reach US$17.2tn by 2025, up from US$10.7tn in 2020. This expansion includes digital assets, real assets, private equity and private debt.

The growth is driven by investors' search for higher yields in a low-interest-rate environment and the desire for portfolio diversification. 

A survey by Fidelity Digital Assets found that 36% of institutional investors own digital assets – and this number is expected to grow.

Matt says: “There are a few ways of looking at growth drivers: supply-side drivers and demand-side drivers.”

On the supply side, he notes the role of regulators in allowing new structures to be distributed to a new audience, “which will ultimately allow asset managers to access largely untapped AUM from retail investors through vehicles like LTAFs and ELTIF 2.0's”.

He adds: “We have retail investors who are more aware of their wealth options (or lack thereof) and wanting access to private markets products since these are key tools the ultra-wealthy and institutional investors tend to utilise in their portfolios.”

The expansion of alternative asset classes presents both opportunities and challenges for asset managers. To capitalise on these trends, they need to develop expertise in these alternative asset classes and build the necessary infrastructure to manage them effectively. This may involve hiring specialised talent, investing in new technologies and forming strategic partnerships.

According to a study by Deloitte, 86% of investment management firms are increasing their investment in AI and data analytics. The successful asset managers of the future will be those who can effectively blend human expertise with technological innovation, providing tailored solutions that meet the diverse needs of an increasingly sophisticated investor base.

Matt concludes: “Democratisation by regulators and asset managers is a big part of solving for retail access and contributing towards the sector's growth, and at Sidekick we're looking to close the gap by offering a great digital channel to access these products, which are generally only offered by private banks or traditional wealth managers.”

To read the full article in the magazine, click HERE.

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