Role of outsourcing in easing structural challenges in the asset management sector

Published on February 25, 2025 by Priya Vaidyanathan and Nuwan Jayawardana CFA

Outsourcing – a high-speed, low-risk, low-cost path to transformation

The rapid evolution of AI and the range of structural challenges faced by the asset management sector demand cutting-edge technologies, specialised expertise and significant investments in both personnel and infrastructure. This is especially true for midsize firms that may not have sufficient resources to invest heavily in these areas in a timely manner. For them, outsourcing becomes an indispensable strategy. They can strategically integrate outsourcing to navigate their transformation journey through a low-risk, low-cost and high-speed path.

Outsourcing enables these firms to access specialised skills and advanced technologies without the significant upfront investment required to develop these capabilities in-house. This strategy not only expedites the transformation journey but also ensures that these firms stay competitive and responsive to market changes without overstretching their financial and operational capabilities.

Benefits of outsourcing

By outsourcing, midsize asset managers in particular can derive an array of strategic benefits as they address the complexities of AI transformation and other structural challenges. Below, we explore how outsourcing can drive low-risk, low-cost and high-speed advantages across key operational areas.

1. Cost efficiency

Outsourcing can reduce operational costs substantially, critical for midsize firms with limited budgets at their disposal. By outsourcing non-core functions across operations, asset managers can not only enhance efficiencies of existing cost structures but also avoid the significant capital expenditure required to develop and maintain in-house AI capabilities. These savings come through areas such as technology infrastructure, recruitment and training costs. Moreover, due to their economies of scale and expertise across functional areas, large KPOs such as Acuity can offer services at a lower cost (vs the cost to perform functions internally). These cost savings enable asset managers to allocate more resources to core activities such as investment strategy and client relationship management, improving overall profitability, stability and growth.

2. Access to specialised expertise and technology

Outsourcing provides immediate access to specialised skills and the latest technologies for midsize firms that may lack the resources to invest in cutting-edge technologies or hire top-tier talent. This is especially crucial for AI integration, where advanced knowledge and tools are essential to execute AI-driven solutions effectively. Moreover, outsourcing partners such as Acuity bring not only a wealth of experience in delivering AI and other technologies to asset management functions but also domain expertise crucial for developing, testing and optimising these solutions. Acuity’s deep understanding of the asset management sector enables it to tailor technology solutions while ensuring the technology is both effective and aligned with industry standards. Moreover, Acuity helps firms refine and perfect technology solutions through rigorous training and testing support, before full-scale implementation of these solutions, to minimise risk and ensure seamless integration.

3. Enhanced operations, compliance and risk management

Enhanced operations and risk management are key advantages delivered by outsourcing. Asset managers often face challenges in mitigating operational risks due to market fluctuations, regulatory developments and technology disruptions. Leveraging specialised outsourced service providers such as Acuity to handle non-core functions using their expertise and technology helps mitigate these risks. Outsourcing can deliver significant benefits to the compliance function with immediate effect.

The regulatory environment that asset management firms function in continues to evolve, becoming increasingly complex and requiring firms to navigate a maze of compliance requirements; this could be resource-intensive and challenging to manage in-house. Asset managers are, therefore, increasingly looking to leverage outsourcing partners such as Acuity that offer comprehensive compliance-related services that could help them manage these challenges effectively. Acuity offers an array of services, including compliance monitoring, regulatory reporting and anti-money-laundering checks while adhering to global and regional regulations.

Acuity’s expertise across compliance platforms also enables it to support clients in their platform migration, integration and development, in addition to the regular operational support it provides. Asset managers leverage Acuity’s compliance expertise to stay ahead of regulatory changes and avoid costly penalties and reputational damage. Firms such as Acuity also enable an asset manager’s resources to be directed to core activities while maintaining a robust compliance framework. Outsourcing also enables firms to access the latest compliance technologies, best practices and expertise, greatly enhancing their ability to manage risks in an evolving regulatory environment.

4. Accelerated time to market

In a fast-paced sector, the ability to quickly deploy new technologies, products and strategies is a significant competitive advantage. This is particularly true for research teams, where increasing market volatility requires them to be dynamic and able to quickly scale up or down as the situation demands.

Similarly, new products, strategies, platforms and entry into new markets must be implemented swiftly to ensure improved RoI. This is a significant challenge for midsize firms. Through strategic partnerships with outsourcing companies, such firms can bypass the costly and lengthy process of building in-house capabilities, enabling them to quickly take ideas and innovation to market.

5. Improved client satisfaction through personalised service

The evolving asset management sector has made high client satisfaction increasingly critical for business success. Similarly, increased demand from retail investors for more personalised communication and portfolio management services amid the tighter fund flows in 2019-21 make client retention crucial for sustaining revenue. Similarly, in the institutional space, investors demand innovative and tailored investment strategies, dedicated relationship management and proactive communication.

Against this backdrop, firms must transform their operations and technologies so they can deliver customised solutions with increased transparency and regular, personalised interaction. While AI will play a key role in this transformation in the medium to long term, outsourcing provides a compelling immediate solution for asset managers. Outsourcing enables them to delegate non-clientfacing tasks such as research, data management, reporting, digital marketing and compliance to specialised providers. As a result, in-house teams are free to focus more on direct client interactions, better relationships and overall client satisfaction, which are crucial for long-term success.

Conclusion

Strategic outsourcing, especially through partnerships with KPOs, can play a pivotal role in this transformation. Outsourcing is a low-cost, low-risk, high-speed path to access specialised skills and cutting-edge technology across operations to respond to the complexities of AI integration and achieve greater efficiencies. Moreover, outsourcing enables firms to direct more resources to core activities such as investment strategy, product innovation and client relationship management, enhancing overall profitability and growth.

Firms aiming to position themselves for long-term success in a rapidly changing market can benefit greatly from strategically combining the strengths of AI and outsourcing to bolster their operational capabilities, manage risk more effectively and improve client satisfaction. The intelligent application of AI within an asset management firm can reduce costs and increase AuM. Firms need to consider carefully whether they are partnering with the right provider with demonstrable domain expertise in this crowded area

Read the full outlook for Asset Management 2025 here.

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