Active is: Driving innovation

Asset managers disrupting from within

13/02/2019
colleagues

Summary

In all areas of our lives, disruptive forces and technologies are delivering efficiency, transparency and value by reinventing established models. Asset management is no exception, and the industry’s future success will be shaped by how it embraces and applies disruptive thinking – to place the client at the centre of the business and build trust.

Key takeaways

  • Asset management is changing, driven by shifting investor priorities and technological enhancements
  • Disruption within the industry must focus on enhancing the client experience, and this includes new fee structures
  • New sources of data – and the analysis enabled by technologies such as artificial intelligence – can help enhance the investment decision-making process
  • The ability to access and manage their portfolios digitally is a key factor for a growing number of clients

As investor needs change, the onus is on the industry to demonstrate the value it offers clients. This is an overhaul that should be driven by one primary goal: to enhance the client experience in a way that aligns the interests of managers and investors. At Allianz Global Investors, we’re taking a number of steps. These include rolling out a new fee structure, incorporating innovative technologies within our investment process, and enabling new kinds of digital access to our services.



Aligning interests with disruptive fee structures

Across the industry, active managers are feeling the need to show investors they are worth the perceived extra cost over their passively managed equivalents.

To this end, several of our strategies are now available with a low base fee, comparable to those charged by passive products; clients then pay a performance fee, which only applies when we deliver outperformance. Each strategy’s performance is assessed against its benchmark, and any period of underperformance “accrues” so clients only pay the performance fee once any accrued underperformance within the fund has been made good.

Beyond adding transparency, this disruptive structure may act as an incentive for investors to buy into – or maintain holdings in – strategies that have seen a recent dip in relative performance but which hold the potential for improved future returns. Human nature tends to push investors to favour strategies that have performed well most recently, often at the expense of those potentially poised to perform well in the future. Our new pricing structure may be able to encourage a counter-cyclical approach that helps investors avoid “moving with the herd”.



Informed analysis underpinning decisions

We are also introducing innovative tools within our research processes. We want to ensure the investment decisions we take on our clients’ behalf are informed by the most comprehensive information available.

For example, AllianzGI has always had a strong focus on fundamental research – including our proprietary Grassroots® Research team. In addition to using unique sources of investment insight to predict emerging trends – for example, by conducting interviews with consumers – we now use “web scraping” technology to trawl the internet and harvest data. This might include datasets as diverse as sales figures for electric vehicles, or the vacancy rates for rental accommodations. We cross-index all this data to quickly identify patterns and trends, providing small details that make up the bigger picture.

We continually explore the adoption of external expertise to introduce new technologies like artificial intelligence (AI). We recently held a hackathon, inviting several disruptors in financial technology to showcase their innovations. Following the event, we are looking to collaborate with several of these firms: two which extract unstructured data to inform machine learning and AI, a provider of real-time predictions of trends in the global economy, and one which offers behavioural analysis of our portfolio managers’ decisions.

The aim is to evolve these partnerships and assimilate the technology into our own processes, adding a new dimension to the suite of research tools available to our investment professionals. We believe in the man/machine paradigm; AI will not replace our human portfolio managers, but rather make them smarter. We have also developed a global research platform to enable our investment specialists around the world to share information and debate investment ideas more easily – an internal “social network” that builds on our collaborative culture. The AllianzGI version of the platform has garnered over 500,000 individual posts in the past six years, providing a rich seam of shared views and knowledge.



Digital access for consumers

Technological innovation is also enabling us to reach new investors in new demographics, providing them with a more flexible and accessible user experience. Most notably, our UK partnership with a digital platform offers retail clients more direct management of their investments. Its low minimum investment level brings our active management expertise to a new group of investors, who can rebalance their portfolio and adjust risk levels through an online portal.

Fund details can be accessed anywhere, either through a smartphone, tablet or desktop computer, or by speaking to a human being in the call centre. Unlike most of its peers in the so-called robo-advice space, the platform offers investors purely active strategies, which are blended into a solution tailored for each investor.



Continued evolution to meet client needs

In today’s changing world, asset managers’ success will be determined by their willingness and ability to disrupt their own practices to meet – and surpass – their clients’ expectations.
All of our disruptive initiatives epitomise our commitment to enhancing our clients’ experience at every stage of the investment process. Whether establishing a fair and transparent fee structure, making investments accessible at clients’ fingertips, or ensuring the decisions we make on their behalf are based on deep and diverse analysis, helping our clients remains our guiding principle in everything we do.




Investing involves risk. There is no guarantee that actively managed investments will outperform the broader market. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.

The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted. This material has not been reviewed by any regulatory authorities. In mainland China, it is used only as supporting material to the offshore investment products offered by commercial banks under the Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations.

This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors U.S. LLC, an investment adviser registered with the U.S. Securities and Exchange Commission; Allianz Global Investors Distributors LLC, distributor registered with FINRA, is affiliated with Allianz Global Investors U.S. LLC; Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG, licensed by FINMA (www.finma.ch) for distribution and by OAKBV (Oberaufsichtskommission berufliche Vorsorge) for asset management related to occupational pensions in Switzerland; Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424, Member of Japan Investment Advisers Association and Investment Trust Association, Japan];and Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan.

Grassroots® Research is a division of Allianz Global Investors that commissions investigative market research for asset management professionals. Research data used to generate Grassroots® Research reports are received from independent, third-party contractors who supply research that, subject to applicable laws and regulations, may be paid for by commissions generated by trades executed on behalf of clients. We believe these sources of information to be reliable and are providing the information in good faith, but in no way warrant the accuracy or completeness of the information. We have no obligation to update, modify or amend this document or to otherwise notify you in the event that any matter set forth in this document changes or subsequently becomes inaccurate. In addition, information may be available that is not reflected at this time. We accept no liability whatsoever for any direct or consequential loss or damage arising from your use of the information contained in this document. We and our affiliates, officers, employees or clients may effect or have effected transactions for our or their own accounts in the securities mentioned here or in any related investments. The information provided in this document is provided for informational purposes only and shall not be considered investment advice. Any reference to a particular company shall not be considered an offer to sell, the solicitation of an offer to buy or a recommendation to buy, sell, or hold any security issued by such company. No part of this material may be i) copied, photocopied, or duplicated in any form, by any means, or ii) redistributed without prior written consent.

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Active is: Investing to enable the next wave of innovation

10/06/2019
Man with tablet

Summary

Disruption is impacting all industries as societal shifts drive innovation. We believe active managers are best equipped to help clients navigate this changing landscape, but to do so, it is imperative that they stay ahead of disruptive trends in all sectors.

Key takeaways

  • Disruption is not restricted to tech firms and is affecting all industries
  • Companies are broadening their remit and embracing areas outside their recognised sectors
  • Societal evolution focused around the younger generation’s shifting expectations is driving disruption
  • Innovative thinking is required to protect firms from evolving digital threats