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July 11, 2025 Content Type Blog

Time to rethink the operating model

July 11, 2025 Content Type Blog
Akshat Ruia

Akshat Ruia

Global Head of Buy-side Practice

Crisil Integral IQ

Vignesh Rajaram

Vignesh Rajaram

Sector Lead

Crisil Integral IQ

 

Even as asset managers (AMs) see record assets under management ($128tn in 2024, +12% YoY 1), they continue to face a gradual structural shift that could bring significant operating challenges.

 

 

AMs are now forced to operate in a low-fee environment as passive funds and active ETFs continue to gain traction at the expense of traditional investment products. Besides, there is mounting pressure to reduce costs while meeting evolving client and regulatory demands.

 

 

Emerging trends in asset management

Emerging trends in asset management

 

 

While strong market performance helped ease revenue pressures in 2024 (>70% revenue growth1), the industry remains increasingly vulnerable to external shifts (economic uncertainty, geopolitical risks, changing consumer preferences, technological innovation, and so on).

 

 

To keep up with the evolving landscape, AMs must revisit their operating models across front-, middle- and back-office functions.

 

 

Key pillars of a future-ready model: Scalability, complexity and agility

 

Amid the ongoing structural shift, AMs are under growing pressure to reduce costs without hindering revenue growth.

 

 

According to Boston Consulting Group (BCG), to get back to historical profitable levels, managers will have to cut costs by 20% and increase the share of higher-margin products to ~30%2.

 

 

This will require AMs to shift to a robust operating model - one that supports a firm’s growth ambitions efficiently, while preserving its investment identity.

 

 

As managers embark on this transformation journey, they must factor in three core considerations when designing a future-ready model.

 

 

Scalability - grow efficiently

 

 

A future-ready operating model must support expansion in a cost-effective manner. Amid the growing push for passive investing, which is typically process-intensive, it is important that AMs design operating models that can handle high workflow volumes while ensuring adequate control and accuracy. Furthermore, scalability becomes critical as managers look to expand into newer markets and launch differentiated products. A scalable model enables managers to streamline workflows across functions, driving significant synergies and reducing operational bottlenecks and rising variable costs.

 

 

Complexity - navigate operational challenges

 

 

AMs are gradually entering new asset classes and markets as they seek higher-margin products. A future-proof model should have adequate resources to handle operational complexities, including access to relevant talent and a simplified data and technology platform to transform legacy processes and streamline disparate systems. An inability to navigate the operational nuances of new markets could hinder growth, increase reliance on manual processes and introduce redundancies.

 

 

Agility - respond to change without operational disruption

 

 

A future-ready model should offer AMs sufficient flexibility to quickly adapt to changing market dynamics. An agile model must ensure minimal operational disruption as managers navigate industry shifts, integrate new client mandates and respond to evolving regulations. Key features of such models include resource flexibility, a well-integrated technology that provides real-time data insights, and the ability to support customisation. An agile model is critical to retain competitive edge and drive an accelerated go-to-market strategy for new products. 

 

 

Key pillars of a future-ready operating model

Key pillars of a future-ready operating model

 

 

Since there is no one-size-fits-all approach, we explore how managers can assess their existing operating models to identify the ‘best-fit’ target model.

 

 

Reimagining the operating model through a strategic lens

 

An effective target operating model should not only focus on costs and controls, but also align with a firm’s investment identity. Whether the firm adopts a traditional, quant, private or multi-asset strategy, the target operating model should help create value and provide a competitive edge. AMs should take a closer look at the operating model’s three core pillars - processes, people, and data and technology - to decide what to retain, redesign and partner on.

 

 

Key aspects to consider while assessing the existing operating model

Key aspects to consider while assessing the existing operating model

 

 

1. Process: Core versus non-core

 

 

AMs must use a foundational lens to classify processes across the value chain (front, middle and back office) as core and non-core, in line with the firm’s investment identity. For instance, investment research might be core to an active manager, while index construction would be critical for a passive manager. Similarly, non-core functions, which are typically process-driven with a high scope for standardisation, tend to vary across investment strategies. This detailed mapping enables managers to assess workflows and determine which need to be retained or redesigned as they reimagine their operating model. This enhances competitiveness without compromising the firm’s core values.

 

 

2. People: Expertise versus execution

 

 

Reimagining the people pillar goes beyond resource headcount - it should also factor in location, skill sets, cost of acquisition versus upskilling (GenAI, ESG, in-house platforms, etc.), and value contribution. This ensures strategic differentiation and scalable execution. Without this approach, managers risk overpaying for commoditised tasks while under-resourcing key functions.

 

 

3. Data and technology: Build versus buy

 

 

Data and technology are no longer just enabling functions, but key value drivers central to investment performance and differentiated client experience. AMs must conduct a detailed assessment of the technology stack and data needs in line with strategic priorities to decide whether to build or buy. It is also important to identify gaps in existing systems and gradually shift from fragmented legacy systems to a fully integrated model to ensure consistent and accurate data flow across functions. Inaccurate mapping can slow innovation, duplicate efforts and escalate costs. The focus should be on building selectively, ensuring full integration and enabling deployable at scale.

 

 

Conclusion

 

Legacy models pose operating challenges as the industry undergoes structure shift. AMs must revisit their operating models as fees decline, costs rise and stakeholder (investors and regulators) expectations evolve. Since there is no one-size-fits-all approach, managers must conduct a structured reassessment to identify areas limiting their capability to scale, navigate market complexities, and respond to market cycles and client demands. A focused assessment of the three core pillars of an operating model - Process, People, and Data & Technology - is critical to determine where to scale and which areas to focus on to unlock value and drive competitive differentiation. Failing to act in time risks falling behind in a market that is becoming increasingly competitive.

 


1 BCG – Global Asset Management Report 2025
2 BCG – Global Asset Management Report 2023

 

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