Fidelity’s Global Institutional Investor Survey found that 80% of investors think that, by 2025, blockchain and similar technologies will fundamentally change the industry. 75% believe non-financial technology firms will enter the industry. Those newcomers are expected to trigger consolidation within the industry.
The survey highlighted significant differences in opinion depending on the region. Overall 73% believe that it’s unlikely the industry will be substantially the same in 2025. However, only 59% of Americans expect a significant change. That compares to 82% of Europeans and 81% of UK respondents. In Asia, the Japanese expect the most upheaval at 76%.
Regarding sectors expecting the least change, they include defined contribution with 49% anticipating significant changes. And multi-employer pension plans are at 55%. That contrasts with public sector pensions where 85% predict disruption, closely followed by sovereign wealth funds and insurance companies.
Despite the expectation that AI will be used for asset allocation and risk evaluations in the near future, current investment is low. A third of global institutions are not currently testing or considering AI and advanced analytics. When the scope is narrowed to the US, that figure jumps to 77%.
The survey quotes an unnamed UK Private Pension manager: “Our industry is the most volatile of them all. Choosing to say that it would be the same would be wrong. But the conditions could change in an instant making the market resort to old methods of fight the volatility and move on.”
Jeff Mitchell, chief investment officer, Fidelity Institutional Asset Management said: “As investing becomes more transparent and real-time, the implications for asset allocation and portfolio construction will be profound. Asset allocations will evolve as client needs become more complex, demanding more sophisticated and dynamic investment solutions. It’s still early days, but predictive analytics will become a significant factor in the industry, so all institutions need to define their strategy.”
The survey covered 905 institutional investors in 25 countries responsible for $29 trillion in assets.