Global survey: size matters - large investment managers outperform their smaller counterparts

The latest global survey of investment managers released by SimCorp StrategyLab
has revealed that financial markets have shown strong signs of recovery with
the larger companies achieving the greatest growth: 52% of firms with more than
1,000 employees achieved at least a 6% increase in revenue compared to the
previous reporting year. According to projected growth rates, the trend for
larger firms to outperform their smaller counterparts looks set to continue
with 68% of firms with annual revenue of over $1 billion expected to achieve a
growth of 6% or more. 

Key drivers in achieving growth are: having growth as a primary focus, a highly
educated workforce and a more adaptable IT infrastructure. 

Almost half of the surveyed investment businesses (47%) identify growth as
their top priority going forward, relegating risk management and cost control
to second and third place respectively. Of these, 34% expected to achieve a
growth rate of 6% or more during the next reporting period. By comparison, just
9% of those having controlling costs as a priority are expected to achieve this
level of growth and 27% with risk mitigation as a priority. 

Key growth acceleration strategies are the introduction of new products (65%)
and targeting new client segments (60%). Entering new geographic markets was
the third most used growth accelerator (37%). However, while only one in three
European companies (35%) intends to open a new location or locations by 2011,
the desire to do so in other parts of the world is at least twice as strong -
America (81%) and Asia Pacific (54%). 

There is an apparent correlation in the findings between a company's past and
future growth and how many MBAs/Masters of Finance it has on its staff: the
more highly educated its staff, the more likely a company is to achieve high
growth rates. One in five respondents projecting at least 6% revenue growth
have two-thirds of their staff holding MBAs, whilst not a single respondent
with low (less than 2%) revenue growth projection can claim to have this many
staff with MBA degrees. The numbers are not radically different for those with
master's degrees in finance. Furthermore, one in three growth-driven companies
(34%) have at least 30% of staff holding an MBA, versus one in four of
risk-driven companies (23%) and only one in twelve of cost-driven companies
(8%). 

Having an IT infrastructure capable of supporting a company's growth efforts is
vital. Only one respondent out of 100 believed that IT infrastructure was not
at all important in supporting growth; 87% had the opposite view. Risk-centric
companies were more pessimistic about the capability of their IT infrastructure
to support growth. Once again, size is a factor with smaller companies tending
to have less confidence in their IT infrastructure whereas larger companies are
more likely to have the resources to invest in their IT infrastructure.
Ostensibly this means that large companies can automate several processes that
the smaller companies will have to do manually and therefore be in a better
position to manage growth. 

Professor Ingo Walter, director of SimCorp StrategyLab commenting on the
results of the survey, said: “This survey brings out a number of interesting
issues. There is a clear emphasis on new client acquisition, which implies
client losses on the part of competitors resulting in an industry shakeout.
Equally compelling is the perception that larger asset managers did better in
the crisis and now have higher growth expectations than smaller ones. On the
product side, there is importance attached to innovation which actually adds
value as perceived by clients who are sensitive to  the complexity, lack of
transparency and illiquidity that characterised financial innovation leading up
to the crisis. The need to manage assets professionally in the financial system
is ubiquitous. Many of the larger firms, however, expect to be able to leverage
their IT infrastructures as a durable source of competitive advantage and
growth. But the structure, conduct and competitive performance of individual
asset managers cannot be taken for granted, even in an optimistic growth
scenario.” 

The 2010 global investment management growth survey was initiated and prepared
by SimCorp StrategyLab. The interviews were conducted by The Nielsen Company.
The survey was based on 100 CATI interviews with respondents randomly selected
from investment management institutions around the world. The persons contacted
had senior and/or strategic responsibility, and/or decision-making with; they
were either members of executive or general management boards. The interviews
were conducted during February and March 2010. 

To download the Global Investment Management Growth Survey 2010 results, go to
www.simcorpstrategylab.com. Other significant publications of SimCorp
StrategyLab include two books and two additional surveys on risk and cost,
respectively. 

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Enquiries regarding this announcement should be addressed to: 
Lars Falkenberg, Assistant Director, SimCorp StrategyLab (+45 35 44 88 00/+45
26 30 01 27) 
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SimCorp StrategyLab 
SimCorp StrategyLab is a private research institution, headed by Mr Ingo
Walter, Seymour Milstein Professor of Finance, Corporate Governance and Ethics
at Stern School of Business, New York University. SimCorp StrategyLab research
work focuses on identifying, understanding and suggesting solutions to issues
pertaining to mitigating risk, reducing cost and enabling growth in the
investment management industry. www.simcorpstrategylab.com