All change? Asset management
in the new normal

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October 20, 2020
 
The pandemic has profoundly affected many aspects of everyday life, and the same holds true for the asset-management industry. Here, Murdo Maclean, investment manager at Walter Scott, argues that, while technology has helped business life to continue, it can never overcome our desire to see and be seen.

Hope. A short word that’s big enough to provide support when things don’t quite turn out as expected. Back in March, when the words Covid and lockdown suddenly became an integral part of our daily lexicon, we had a hope that it would be all over by Christmas. Well, that’s not likely to happen. So what do we do? “We adapt,” says Maclean.

For many asset-management professionals, particularly those with stock-picking and client responsibilities, the adaption process covers two bases. First, potential clients still want to know if managers can deliver consistent investment performance. And second, while the need to convince the same managers that their portfolio holdings are still in good shape remains the same, the way this information is communicated has changed.

In what we might freely call the ‘old days’, much of the due diligence process performed by clients seeking to appoint a portfolio manager was already being completed remotely. But with the advent of Zoom, Webex et al., it is the face-to-face meeting that came at the very end of the process that has seen the most significant change. So, does virtual contact work? “This form of communication is not perfect, by any stretch,” says Maclean, “but managers and clients can’t hang around forever, and decisions need to be made. Importantly, I don’t believe that the current environment has caused significant delays with the appointment process.”

However, the desire to achieve results using the technology at hand cannot mask the fact that, as human beings, we have a desire to meet, be social, and share information: “Clients will eventually want to see their managers – it’s that final step of trust,” he adds.

This experience is being mirrored at the company research level. Surely this is where the impact of social distancing will be keenly felt? “Not necessarily,” says Maclean, “exposure to senior executives is now easier because there is no reason for them to be away on company business and, therefore, unavailable.” This is further demonstrated by anecdotal evidence of managers talking to individuals they had previously been unable to meet. He notes that “This level of access is allowing managers to gather some useful product-specific information.”

Another novel development that is proving useful is the virtual tour. Plants or manufacturing facilities that may have been omitted from a packed itinerary can now be explored and assessed. “Managers can potentially build a better picture of a firm’s fixed assets, which, in turn, helps to match the rhetoric with reality,” observes Maclean.

That said, he is clearly aware of the elephant in the meeting room: “Virtual gatherings mask all types of body language and, let’s face it, most people look somewhat uncomfortable in video-conference mode, so it’s harder to judge whether there are underlying issues with a business or the person you are talking to just dislikes being in front of a camera.”

Aside from the pandemic’s impact on the structure of formal meetings, Maclean also points out the effect it has on conferences and events. “These cannot be replicated remotely, so there is an obvious gap where networking used to sit, which is an unfortunate downside of recent events.”

Ultimately, he believes that the new normal will be reacquainted with the old norm, and actual meetings will resume. But what emerges, for both manager selection and company visits, will be something of a hybrid. The aspects of the Covid interregnum that make our lives better will be retained, and the nuisance elements quickly jettisoned.

 

All investments involve some level of risk, including loss of principal. Certain investments have specific or unique risks.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others.

BNY Mellon Investment Management is one of the world’s leading investment management organizations and one of the top U.S. wealth managers, encompassing BNY Mellon’s affiliated investment management firms, wealth management organization and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally.

Walter Scott & Partners Limited (Walter Scott) is an investment management firm authorized and regulated in the United Kingdom by the Financial Conduct Authority in the conduct of investment business. Walter Scott is a subsidiary of The Bank of New York Mellon Corporation.

Views expressed are those of the manager stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. This information contains projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or expectations will be achieved, and actual results may be significantly different from that shown here. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.

Forecasts, estimates and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Certain information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please consult a legal, tax or financial professional in order to determine whether an investment product or service is appropriate for a particular situation. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. BNY Mellon Securities Corporation is a subsidiary of BNY Mellon. 2020 BNY Mellon Securities Corporation, distributor, 240 Greenwich St, New York, NY 10286.

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