After years of growth, asset managers face a number of challenges. Here, we examine these challenges and provide insight into the state of the asset management industry.

1. Tightening pressure transforms the landscape:
The state of asset management

2. © 2016 Grant Thornton LLP. All rights reserved. 2
Introduction
After years of growth, asset managers face a number of
challenges. Pressure on fees is mounting as new competitors
introduce alternatives to the traditional fee model and mutual fund
investors move away from higher-fee actively managed funds.
The regulatory burden is increasingly daunting as the SEC looks
to improve liquidity risk management by open-ended funds, as
well as to sharpen scrutiny on cybersecurity. New tax rules also
require rethinking traditional structures and positions.
Within the following slides we examine these challenges and
provide insight into the state of the asset management
industry.

3. © 2016 Grant Thornton LLP. All rights reserved. 3
Challenges facing the asset management industry
1 Pressure on fees
2 Grappling with a heavy regulatory burden
3 Liquidity risk management
4 More scrutiny on cybersecurity
5 New tax rules and implications

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Challenges
• New competitors are developing alternatives
to the traditional fee model.
• Scrutiny over private equity fees has
increased.
• Investors have moved away from higher-fee
actively managed mutual funds to lower-cost
passive index funds and exchange-traded
funds.
• Technology-enabled robo-advisers are putting
pressure on the lower end of the market.
• Global anti-bribery and anti-corruption laws
present a challenge for the first time.
• The burden of existing regulations continues to
grow as well.
• Form ADV revisions add to disclosure
requirements.
Pressure on fees Grappling with a heavy regulatory burden

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Challenges
• In 2016, the SEC voted to improve the
liquidity risk management by open-ended
funds.
• The regulation will provide more transparent
and relevant disclosures regarding fund
liquidity and redemption practices.
• Asset management firms are targeted by cyber-
threats because of their access to information
about investors.
• Breaches can shake investor confidence and
compromise the firm's ability to raise funds.
• Further complexity is introduced when third
parties have access to investor information.
Liquidity risk management More scrutiny on cybersecurity

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Challenges
• New rules have emerged dealing with
partnerships, disguised sales, debt sharing
and tax audits.
• New tax reform regulations are expected to
call for rethinking traditional structures and
positions.
New tax rules and implications

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How can technology help?
• Today, asset managers tend to operate on many different technology platforms that do not interact with one
another.
• Connecting disparate data systems could provide intelligence and insights on the correlations between
lagging and leading indicators of performance.
• Asset management firms are looking to artificial intelligence solutions to help respond to a growing number
of compliance tasks.
• Rush to embrace regulatory technology has been growing since financial crisis.
• Technology can be leveraged to increase transparency in accordance with investor desires.
Technology holds the promise, but not the single answer

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A changing landscape
• Private equity has grown as larger PE firms move downstream for deals and PE managers become more
comfortable with add-on acquisition strategies.
• Hedge funds face challenges of persistent low interest rate environment and a bull market for equities that
has raged since 2009.
• Large funds have financial resources to invest in technologies needed to address regulatory and risk
concerns.
• Small funds can carve out strategic niche to serve specific investor needs.
• Squeeze created on midsized funds, who are assessing if they can make it on their own.
Certain sectors are benefiting from the changes, to the detriment of others

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Moving forward
• Understand the changing landscape
• Strategically position their firms to deliver value based on their unique strengths
• Use the period of consolidation to create the transparency, insights and fee value that connect with global
investors in innovative ways
• Understand all asset classes and demonstrate the agility to guide investors with effective technology
platforms that cross multiple asset classes
Finally, they will have the courage to follow through with promising innovations that will provide reliable results
for clients
Managers of the best-run firms will:

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Contact us
Michael Patanella
National Sector Leader
Asset Management
Grant Thornton LLP
T +1 212 624 5258
E michael.patanella@us.gt.com
"The entrepreneurial spirit of the industry will always
encourage agile newcomers who are willing to rewrite the
rules. Inflection points mean change, but they also create
new opportunities for growth for a new breed of asset
manager, one who is more diverse, transparent and savvy at
finding ways to help investors manage their wealth and risk."
-Michael Patanella, Grant Thornton LLP's Asset Management
National Sector Leader

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