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Tuesday, July 09, 2013

Optimistic Fundsters Are Ready to Spend

Reported by Nicole Spector

Revenue and headcount are on the rise—at least that's the word from investment management execs. And these top dogs are looking to burn that dough in strategic ways.

The audit, tax and advisory firm KPMG conducted a web survey in February called "KPMG's 2013 Investment Management Business Outlook," which consulted 104 senior execs at a variety of funds including mutual funds, private equity funds, hedge funds, trusts,and managed funds. The research revealed that 81-percent have seen their revenues increase over the past year, up from 60 percent in last year's survey. And optimism is in the air: 84 percent of those surveyed say they anticipate continued increase, up from 69 percent last year.

And where are these head honchos placing their money to continue growth? Geographic expansion and information technology were shown to be the top areas of interest.

Company Press Release

Investment Managers Bullish on Revenue & Hiring, Set to Ramp Up Spending in Technology, M&A Activity and Geographic Expansion: KPMG Survey

Legislative and Regulatory Pressures Remain the Most Significant Growth Barriers

NEW YORK, July 9, 2013 (GLOBE NEWSWIRE) -- Despite lingering concerns over regulatory and political uncertainty, investment management executives indicate revenues and headcount are on the rise, and they appear more confident about the near-term future. They are poised to increase spending on information technology and many are eyeing merger & acquisition activity or geographic expansion to drive growth, according to KPMG's 2013 Investment Management Business Outlook Survey.

However, legislative and regulatory pressures continue to loom as ongoing business concerns.

The KPMG survey of more than 100 U.S. senior executives representing mutual funds, private equity funds, hedge funds, trusts, managed funds and other type of funds, found that 81 percent have seen their revenues increase over the past year, up from 60 percent in last year's survey, and 84 percent believe revenues will continue to increase over the next year -- up from 69 percent last year.

When asked to identify the most promising region for asset growth, 57 percent named the U.S., while 28 percent identified the Asia and the Pacific region.

Executives are equally bullish on hiring with nearly half (46 percent) saying headcount has increased over the past year, and 48 percent expecting more hiring over the next year.

"While economic, political and regulatory uncertainty remain issues for asset managers, they appear more focused on investing in their infrastructure, geographic expansion and growing their businesses," said Jim Suglia, national advisory leader, Investment Management.

Investing in Growth

The executives were asked to identify the top areas they expect to increase spending the most over the next year. The number one choice was geographic expansion at 45 percent, followed by information technology at 39 percent of those polled.

The importance of data analytics continues to rise, especially in the areas of risk management, regulatory, competitive and customer intelligence. Nearly 40 percent said their company has "high analytics literacy," up from 27 percent last year, and 23 percent say their company is "rapidly" moving toward becoming an enterprise with high analytical literacy.

"It's becoming clear that firms that master these new tools and use them--not only to comply with regulations but strategically integrate them into their businesses-- will be the market leaders of tomorrow," said Al Fichera, national partner in charge, Alternative Investments--Audit.

Continuing to identify new areas of growth for their businesses, KPMG's survey showed that more than half (54 percent) expect they will be involved in some M&A activity this year.

Political and Regulatory Challenges Persist

While a number of findings in this year's survey indicate a bullish view by investment management executives, it's clear the sector still faces challenges. In fact, political and regulatory uncertainty remains the biggest threat to their business models, according to 57 percent of the investment management executives polled. However, on the positive side, the survey found that 38 percent of those polled are "very prepared" to manage the changes brought on by new regulations, up from just 28 percent in last year's KPMG survey.

The survey also revealed that 49 percent of the executives believe regulatory and legislative pressures remain the most significant growth barrier for their business over the next year, which is down from 57 percent of those polled last year. Regulatory changes proposed over the past five years are still being enacted and has resulted in KPMG's survey respondents spending less money and time this year on navigating the changes in the regulatory environment. Nevertheless, appropriately complying with new regulations is still the most costly expense they will incur over the next 12 months, according to 55 percent of those surveyed.

Constance Hunter, KPMG's Chief Economist - Alternative Investments, believes the survey results are consistent with the regulatory and cost pressures many survey respondents are seeing.

"Despite concerns about the ability of the economy to grow faster in 2013, asset managers are seeing opportunities for investment and 46 percent are increasing hiring," said Hunter. "Considering the recent positive economic data and a better base for growth in the U.S. from housing, technology and the North American energy boom, we believe that 2013 has the potential to provide an upside surprise in terms of economic growth and investment opportunities."

KPMG's 2013 Investment Management Business Outlook reflects the viewpoints of 104 senior executives in the United States. The web survey was conducted in February 2013.  

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