As managers confront fee pressure, increased regulation, and fundamental factors that interrupt long-term sustainability (e.g., higher-than-normal turnover), they are increasingly outsourcing functions to third parties. According to our research, improving internal employee productivity (65%) and leveraging external capabilities (65%) are deemed the most significant outsourcing drivers. Managers look to firms that can specialize and build scale in a given task or function. Increasingly, managers seek to enhance efficiencies and fortify operational resilience by partnering with third parties. Hence, outsourcing is a governance play in addition to traditional cost motives.

One-third (33%) of asset managers surveyed by Cerulli outsource their entire back-office function and 20% outsource their entire middle-office function. Increasingly, Cerulli observes that outsourcing has become more accepted by the industry. Breakaway managers (or portfolio managers who break away from their current employers to start new firms) are employing an outsourced model starting on Day 1.

As managers evaluate the future state of their operating models, outsourcing will become increasingly important. Continue to explore asset managers’ use of third-party services providers and examine specific topics such as vendor risk management, relationship management, the selection process, and challenges with implementation in our latest report, U.S. Vendor Management & Operations Outsourcing 2022: The Evolution of the Asset Manager Operating Model.