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Top 5 market predictions for 2017
Top 5 market predictions for 2017
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Top 5 market predictions for 2017

06/12/2016

In a financial environment that is increasingly difficult to read, we share our insights on the 5 biggest trends impacting the sector in 2017

1 - AUM on the rise

Supported by favourable demographic drivers, we expect global assets under management (AUM) to grow by 5% per annum. Mutual funds in general – and Undertakings for Collective Investment in Transferable Securities (UCITS) in particular – should continue to grow more quickly, at around 10%. Our view is that Irish and Luxembourg funds should attract more interest than other domiciles, pushed by cross border distribution and the passporting uncertainties created by Brexit.

In an effort to generate alpha, we anticipate increased allocations to alternatives, benefitting mainly private equity, real estate and alternative UCITS - and to a lesser extent, hedge funds. Fund of hedge funds will face increasing pressure.

2 - Solutions to asset managers' challenges

Despite a mainly positive long-term outlook, our experts foresee that asset managers will remain under strong pressure and go through a painful transition into 2017 due to rising regulatory constraints, decreasing returns and the growing weight of passive strategies.

The drive towards increased efficiency will continue. We anticipate two or three mergers among the industry’s top 50 asset managers and a growing recourse to back, middle and front office outsourcing.

3 - No escape from collateral

If collateral solutions were a hot topic in 2016, discussions with our clients suggest that 2017 will raise their status to a critical level due to the implementation of EMIR in March and the completion of T2S. In Europe, we will see an increasing demand for collateral, especially for fixed income and cash.  Timing and the availability of high quality assets will be determinant for market players. Choosing first-rate, post-trade solutions, and optimising both settlement and collateral efficiency, will be other crucial requirements.

4 - Unblocking blockchain

Since mid-2015, blockchain has been on everybody’s mind, but this technology has not yet realised its full potential. We think that 2017 should bring the roll-out of the first concrete blockchain use cases, which will deliver cutting edge solutions to post-trade spaces, currently sub-efficient.

5 - The ubiquity of ESG

Environmental Social and Corporate Governance (ESG) criteria will increasingly drive investment decisions.

In order to enforce the implementation of the COP21 agreement, government pressure will increase - through budget incentives or regulations - pushing towards green and sustainable finance, and facilitating the transition to renewable energies. This will particularly be the case in Europe and Asia. Especially in Asia, local circumstances, more than the global implications, are expected to be the main motivation for the transition to green energies.

It remains to be seen whether all these predictions will materialise. One thing is certain: the investment industry is in for another challenging year.

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