Understanding Business Economics

There is a new reality in the investment management business requiring better insights into the drivers of profitability

What are the industry trends driving a need for increased understanding of business economics in the investment management industry?
New realities in the investment management business are requiring better insights into the drivers of profitability. Fees are under pressure, while globalization of wealth is requiring more diverse product mixes. Channels are proliferating, and diverse client needs are adding business complexity. Markets remain volatile.

How has the industry responded?
While many investment managers historically used assets under management (AUM) as the proxy for profitability, some firms have begun measuring business performance with views of both AUM and revenue. However, these simplistic metrics are no longer adequate. A new comprehensive, reconciled, multidimensional view of economic performance is required so business executives can quickly make more confident resource allocation, pricing and service delivery decisions.

What are the typical benefits of a greater understanding of business economics?
Investment managers can:
  • Explore the dynamics of operating leverage and capacity constraints.
  • Enhance product pricing.
  • Rationalize and/or restructure products to grow revenues and improve margins
  • Measure return on investment for new products
  • Understand business profitability dimensions.
  • Make fact-based decisions quickly.
  • Increase accountability for results across the enterprise
  • Optimize the allocation of resources and capital

How Capco can help?
Capco offers experienced teams that specialize in business economics for investment managers. We employ a unique, flexible, multidimensional measurement approach to model and understand the economics of your business. Our prototyping tools, frameworks, and accelerators help reduce implementation time and cost. And our proven implementation approach that facilitates business acceptance of results.