Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
Change is the only constant – a phrase that could not be more relevant nor timely, to describe the life-changing start we have had to this new decade. At just the halfway point, this tumultuous year has already gone down in the history books.
And further changes are afoot.
Investment firms face challenges to their business model in the form of fee compression and the need to better integrate technology, and clients are asking for more personalised advice and products that align with their values. These pressures and demands also have implications for investment professionals and their careers.
In fact, 43% of investment executives think the role they perform today will be substantially different in five to 10 years’ time.
Major changes are set to emerge through trends such as machine learning, artificial intelligence methods, alternative data for portfolio construction, as well as solutions investing and greater customer need integration.
In the CFA Institute report ‘Future of Finance – Investment Professionals of the Future’, we have classified three key areas of change that individuals and teams should remain mindful of.
Adaptability and lifelong learning will be essential. In fact, 89% of industry leaders agree that individuals’ roles will be transformed multiple times during their careers.
A combination of Artificial Intelligence (AI) and Human Intelligence (HI) will become the norm. Significant professional roles at the investment firms of the future will include investment roles, technology roles, and innovation roles.
As a result of the combination of AI and HI, we believe we will see a preference for portfolio management teams increase and a reduced reliance on ‘star’ portfolio managers. This means a focus on teams and workforce diversity to improve decision making.
We will see a preference for portfolio management teams increase and a reduced reliance on ‘star’ portfolio managers
Interestingly, soft skills are of most interest to individuals across all career phases. Early career professionals also favour portfolio risk optimisation and data interpretation. In later-career phases, sustainability and alternative investments are prioritised more highly.
This has led to the rise of the so called ‘T-Shaped’ professional, of people who are subject matter experts who adapt to changing environments, and can work across disciplines. This includes being at ease with technology.
Because a group’s collective intelligence will matter more than individual intelligence, investment firms will increasingly favour teams supported by technology.
Organisations will seek to use technology to enhance human roles with some net cost and efficiency gains. Technology opportunities will cause role displacement, creating challenges as leaders manage the cultural transition.
In addition, training is likely to increase. Sixty percent of industry leaders surveyed expect firms to increase training and development, to continuously upskill professionals to remain effective. People who develop a deep expertise stay longer because their key development needs are being met.
ROADMAP FOR DEVELOPMENT
In times of rapid change, investment professionals who progress are the ones most willing to adapt.
An effective career journey will no longer look like a series of well-executed and well-timed interventions. Career paths in this new normal will be less prescriptive and more varied than
Investment professionals should look to build a technical edge at the start of a career. The ability to work with technology is a necessity for all professionals. The success of AI and HI applications will be dependent on T-shaped teams with shared team space and shared language. There are major opportunities for specialist roles in technology to build financial context into technology development and deployment.
In mid-career, it’s wise to blend in soft skills to be more effective. Add leadership skills that produce value for others. Make connections and develop lateral thinking (i.e. T-shaped skills).
For further insights, read the CFA Institute report: Future of Finance - “Investment Professionals of the Future”, which can be found here.
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