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John Ions: The year ahead for active managers
Published 5 January 2024

John Ions, CEO of Liontrust

It would be easy to write yet another gloomy comment about the future of active management. But the outlook is bright for asset managers with a focus on actives. This is important not just for those businesses, but also for the companies they invest in and society in general.

Let's start with the simple part: the challenges faced by active managers. They have never been confronted by such a competitive environment to attract and retain assets as is the case now, both from within and outside the sector. This is compounded by people's savings being constrained by the cost-of-living crisis, geopolitical instability, increasing time and resources spent on meeting regulation, the need to build greater trust in asset management and consolidation among their distributors.

UK-focused asset managers face the additional challenge of a local stock market that has been out of favour for many years.

Now for the good part: the opportunities. People's need to save and invest for the future has also never been greater, particularly to ensure they have adequate savings and income throughout retirement. Investment choices, like in most areas of life, have grown significantly, requiring more advice and expert management. There are still strong long-term tailwinds behind asset management.

Equity markets are currently offering the chance to invest in some quality companies at very attractive entry points, especially among small- and mid-caps. This is perfect territory for active managers, and an opportunity to attract assets next year.

Another is when cash rates do fall and people with savings in money market funds start looking for a new home. Active managers must be ready to attract these flows when this happens by having strong and focused sales and marketing. Active managers must deliver what they say they will do, focusing on areas of investment where asset managers can add real value. Having robust, repeatable investment processes will help.

Asset managers must also offer products that institutional and retail investors want, rather than the products they think investors should want. Asset managers should work in partnership with distributors and investors to achieve this.

M&A can be challenging as we all know, but it can also be very successful in bringing talent to an asset manager and achieving diversification. This diversification is in the form of thought, culture, processes, product and distribution. It is important for asset managers to have diversity of product to meet the demands of different investors and to navigate through the cycles of demand. We have seen the risk for asset management businesses of relying on a couple of funds or major institutional investors. Therefore, the asset management sector will continue to experience M&A in 2024, along with the other parts of the distribution chain.

In environments like this, a flexible remuneration model for fund managers and other employees can help cost management. This is especially the case through a revenue share model for fund managers to ensure they are fully aligned with the business and investors.

Asset managers must also build trust. The importance of brand is often underappreciated in asset management, yet it can encourage investment as much as it drives sales in any other industry. Trust also comes through demonstrating the value that active management can add, delivering what we say we will deliver over the long term, real investment talent and strong processes, clear communication that is tailored for different audiences, and great service. Increased use of technology and digitalisation will aid improvements in service and personalised communications.

By focusing on all of this, active managers will not only meet the challenges of 2024 but also exploit the long-term opportunities that will be for the benefit of asset managers, the companies they invest in, the economy and the investors for whom we are guardians of their savings.

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Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.


This document is issued by Liontrust Asset Management PLC (2 Savoy Court, London WC2R 0EZ). This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.

This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.