Willis Towers Watson has embarked on an ambitious program, which it is calling the ‘Asset Management Exchange’ (AMX), to take out a layer of costs by reducing duplication of non-value-add services provided by fund managers and other service providers.
The exchange was discussed at an event organized by the Thinking Ahead Institute, which is a not-for-profit organisation originally set up in the late 1990s as a business unit of the then Towers Watson, curates a range of research projects. But its big goal is to change investment for the better for the benefit of the end saver through a new model which, in part, reduces costs and/or increases returns for investors.
Tim Hodgson, who heads up the group, usually referred to as TAG 2.0, (after Thinking Ahead Group) and Paul Deane-Williams, the new business head who joined last year following growth in support for the organisation from asset owners and managers, were in Australia last week for two member events.
There are about 40 paid-up members of Thinking Ahead Institute, split roughly 50:50 between asset owners and asset managers. Five are Australian super funds.
Deane-Williams said that the Australian funds were particularly supportive of the Institute because they were not only looking to improve the outcomes for their members, they were also looking to improve the outcomes for the whole industry.
The three main areas of research currently are: long-horizon investing; sustainability in investing; and, improving the world of defined contribution (DC) funds. Australia has the highest proportion of DC funds in the world, representing about 90 per cent of all super assets.
There are also two other research themes: integrated reporting; and, investment as an eco-system. Integrated reporting, which started in the corporate space, includes non-financial assets such as human capital. The “eco-system” theme is looking at the potential impact of artificial intelligence and rob-advice on the changing world of funds management.
By the end of the year the Institute may have an implementation solution for clients to better realize their sustainability beliefs through bespoke portfolio construction. “That would be a world first,” Deane-Williams says.
With AMX, he says, that is something that WTW hopes asset owners will “take to heart”, because they will be instrumental in bringing asset managers to the platform.
“It’s currently being funded by WTW as a separate entity for buyers and sellers to meet up. In the US, WTW has a healthcare exchange – the principle is similar,” he says. “We have massive duplication in the industry. Every manager has its own backoffice, its own compliance team, custodian and so on. The aim is for AMX is to provide all this infrastructure on an exchange. It’s an opportunity to avoid the need for fund management packaging and allows the manager to get on with their job of investing, which is what they do best. It’s potentially a real disruptor in the industry.”
At the moment AMX is just available in the UK for hedge fund investment, but it will be progressively expanded across other asset classes and rolled out on a country-by-country basis, Deane-Williams says.