Corporate Funds, Defined Benefit, Endowments/Foundations, Governance, Institutional Investors, Pension Funds, Public Funds

Asset Owners Must Reconsider Business Models to Succeed in the Future: Consultant’s Report

Asset owners looking to succeed in a world of substantial changes in technology, demography, globalization, environment and social norms will need to significantly reposition their business, operating and investment models, according to new research from global advisory broking and solutions company, Willis Towers Watson.

In a just-released paper, titled The Asset Owner of Tomorrow, the firm’s Thinking Ahead Institute addresses four key challenges faced by asset owners and how these trends might ultimately shape their journey in the next five to 10 years.

The four big shifts the paper outlines in coming years are:

  1. Shifting common approaches to professionalism: Asset owners must shift from a focus on performance and toward professional accomplishments, acknowledging their wider public duties as well as taking a longer-term view of their capital allocation and ownership responsibilities.
  2. Increased adoption of systems and automation to enhance decision making: Successful asset owners will become more efficient in handling big data and marshaling computer-based technology alongside human technology in order to create opportunities for networked thinking.
  3. Using culture and diversity to further evolve the people model: Asset owners have typically not enjoyed a significant history of strong leadership, thereby reducing the competitive advantage an effective culture adds. In particular, the need for greater diversity arises including “identity diversity,” but going beyond that into “cognitive diversity” as well.
  4. Rethinking the investment model: To respond effectively to the multiple problems of applying modern investment thinking, investment models must take into account increasingly sophisticated risk and return systems and methods while developing sustainability practices in a more centrally managed way.

“Being an asset owner can be incredibly complex, and we don’t expect life in the next 10 years to become any easier,” stated Roger Urwin, global head of investment content at Willis Towers Watson, in a press release that accompanied the paper’s release. “It starts with a clear definition of what we mean by the term ‘asset owner’—these are the institutions that manage collective savings of over $50 trillion under discretionary and fiduciary responsibility. The size of their assets and influence make asset owners too important to fail in their mission. Central to the practical steps outlined in this report will be an overarching need for asset owners to better understand the world in which they operate if they are to manage risk, exploit opportunities and thrive …” He added, “All situations for asset owners are different, and the art to their future success will be understanding and evolving best practice principles and applying them to unique circumstances. As a result, there is an overarching need for them to understand the world in which they operate through a model that connects all the dots.”

The Thinking Ahead Institute is a global not-for-profit member organization whose aim is to influence change in the investment world for the benefit of savers. The Institute’s members comprise asset owners, investment managers and other groups that are motivated to influence the industry for the good of savers worldwide. It has 45 members with combined responsibility for more than US$12 trillion and is an outgrowth of Willis Towers Watson Investments’ Thinking Ahead Group.

 

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