By Aaron Filbeck, CAIA, CFA, CFP®, CIPM, FDP, Managing Director, Global Content Strategy, CAIA Association
and John Bowman, CFA, Chief Executive Officer, CAIA Association
In March, we convened our second of eight leadership roundtables in Los Angeles, bringing together ~15 CEOs, CIOs, and other senior investment professionals to discuss the next decade of our industry. These leaders represented several of the largest and most influential U.S.-domiciled traditional asset management firms, consultants, and asset owners in the world. As you might expect, the discussion was dynamic and opinionated, reflecting a wide variety of views that have infiltrated the deepest and most complex capital market system globally.
“What is occupying the majority of your leadership team’s mindshare today?”
As if thinking ten years out wasn’t enough, there was plenty of talk about the present. The velocity of capital moving into private markets, product development, geopolitics, and shifting capital markets have made navigating today’s investment world “the most complicated moment in history.” All this being said, a few key themes emerged:
Wealth Management and Product Proliferation
While not a surprise, many organizations are equally excited and cautious about the rise of the two-legged investor. Today, as new entrants join the market, there’s a significant dispersion of sophistication between super users, early adopters, and novices.
While some financial advisors are just beginning their journey, some of the largest and most influential RIAs across the country are partnering with asset managers as an institution would, negotiating fees, implementing revenue shares, and even creating their own product wrappers together. The challenge for the asset manager is building a business around this diverse and fragmented market, while the challenge for the wealth manager is moving themselves up the learning (or asset-level) curve.
Further, the pace at which product proliferation has taken place continues to accelerate – liquidity mechanisms are being sliced more finely with each iteration (to the point where the ETF business is getting into the mix). The underlying question seemed to be, “Have we gotten over our skis a bit, in the short term?” Yesterday, educating the advisor was centered around asset class knowledge; today, it includes the need to understand nuances across a whole supermarket of vehicle options.
The Impact of Interest Rates on Global Capital Markets
The second big concern was the impact of higher interest rates on markets and the investment professional’s frame of reference.
On the former, sustained higher interest rates have implications for cost of capital assumptions, forward-looking relationships amongst asset classes, and the value proposition and risks of some asset classes. For example, private credit came of age during a time when interest rates were near zero – when does the collision of higher base rates and the velocity of capital chasing these assets come to a head? Given the opacity of the private credit books, it’s still unclear whether enough rationalization and clean-up has occurred from this whipsaw. Further, one CEO expressed that this is the largest quantity of “rescue finance” inquiries they’ve ever experienced; perhaps a proxy for the default metric we watch on the corporate side.
On the latter, any investment professional who has entered the industry in the past four decades has only experienced a secular interest rate decline and has, therefore, enjoyed a unique period of history that, when zoomed out, doesn’t accurately reflect periods before the 1980s. Even further, anyone who has entered in the last 15 years has spent most of their career in a ZIRP environment. This frame of reference risk has serious implications for decision-making, modeling, and building portfolios.
Globalization of Private Capital
The third and final theme was the globalization of private capital. To date, AUM in the private markets is still primarily concentrated with U.S. GPs. However, the globalization of U.S.-based operations by some of the largest and most well-resourced GPs, affectionately termed “the mindshare from U.S. to international and emerging economies,” continues to be a growing trend. In other words, U.S. GPs see opportunities to grow their fundraising capabilities overseas.
Why does this matter?
There are two reasons. First are the implications for global capital markets as foreign (in this case, U.S.) capital moves into local economies. That may be a bit more obvious because we’ve seen it in public markets. Second are the implications for the local talent these GPs attract to build these firms. There is a historical knowledge transfer cycle for businesses in international economies, which (in our opinion) was blueprinted by the traditional asset management industry – attract talent, teach them, scale up the business, and eventually, some will spin-off on their own.
“What keeps your team up at night as you examine the most critical issues that we’ll be talking about in 2035?”
The broad umbrella of A.I. and technology is one of the biggest risks, opportunities, and critical issues that very senior leaders are thinking through today. What was most interesting, however, was the multi-faceted framing of the issues. Within A.I. specifically, this group approached the topic through the following lens:
Investment Implications
Business Models
Culture
Identifying investment opportunities, while challenging, was the most straightforward, and each person brought their own views of how to capitalize on that theme and supplement human-led tasks. Addressing business model risks was slightly more complicated, but many of these organizations are already testing A.I. tools to improve efficiencies, implement strong data governance and ethics, and assist in strategic business decision making. An important note here was that the pace of change is rapid, and it requires vigilance to stay competitive – just because something didn’t work six months ago doesn’t mean it doesn’t work today.
The most challenging issue, and where the least amount of confidence resided, was around stewarding a strong organizational culture in a world of A.I. Not only was there discussion of decision-making and judgment, but also a heathy dialogue on the societal role of attracting and retaining young talent in a world where the human competes with the machine. As one person put it, the investment professional of the future must become a “social butterfly that joins tools and connects everything together.” It’s no longer about your ability to build a model from scratch, it’s about your ability to be a superuser of all the tools at your disposal. “Prompting and challenging the engineer” through strong conceptual and critical thinking skills is essential.
Putting It All Together
It goes without saying that these themes have implications for markets, business models, and our industry more broadly. But they also have serious implications for the future of learning and how professional bodies like CAIA Association must evolve and enable the next generation to be equipped with sound judgement, soft skills, and decision-making in a world increasingly driven by complexity.
About the Contributors
Aaron Filbeck, CAIA, CFA, CFP®, CIPM, FDP, is Managing Director, Global Content Strategy at CAIA Association. His industry experience lies in private wealth management, where he was responsible for asset allocation, portfolio construction, and manager research efforts for high-net-worth individuals. He earned a BS with distinction in finance and a master of finance from Pennsylvania State University.
John L. Bowman, CFA was appointed CEO for the CAIA Association in January 2025. He has devoted over 25 years to the asset management industry to recover the narrative of the value that the investment profession brings to society. He is a staunch public advocate for market integrity, long-termism, investor outcomes, diversity, human dignity and educational standards, as necessary ingredients to building a sustainable and healthy profession. John previously served as Managing Director for the Americas for CFA Institute, a region comprised of 40+ countries from Canada, the U.S., Central America, South America and the Caribbean. Before that, John was a portfolio manager for non-US equity strategies at both Boston Company and SSgA for several years. John is a prolific, speaker, writer and commentator, frequently keynoting industry conferences and appearing in investment and business publications such as the Wall Street Journal, The New York Times, Pension and Investments, Financial Advisor, The Independent, Wealthmanagement.com and CNBC. Bowman earned a BS in Business Administration from Mary Washington College and is a CFA charterholder.
Learn more about CAIA Association and how to become part of a professional network that is shaping the future of investing, by visiting https://caia.org/