Lynn Strongin Dodds examines Acuiti’s Q2 asset management report and how asset managers intend to stay competitive in the derivatives space through growth and a continued focus on operational efficiency. The report highlights trends in hiring, the use of AI and views on 24/5 trading.
The second quarter of 2025 is expected to follow a similar pattern set in the first three months with heightened volatility, regulatory uncertainty, and geopolitical tensions. The confluence of factors is causing the asset management community to look more closely at closing the gaps and enhancing operational efficiencies in derivatives, according to Acuiti’s Q2 asset management report.
These insights were collected from the Acuiti Asset Management Expert Network, a global group of senior derivatives-focused executives who are surveyed quarterly. It found firms were bolstering their defences to ensure they could weather the volatility while remaining agile and positioned for growth.
This does not mean cutting headcount though. In fact, the opposite is true with only 8% of the network intending to prune the ranks. Over half do not plan any changes while 40% are looking to hire more people for their derivatives operations. This aligns with the results from previous reports, where the majority of asset managers had a positive outlook despite current uncertainties.
In terms of key focus areas, business development tops the charts this year with 63% planning to increase headcount, emphasising a strong push for growth and expansion. Technology hiring overall is on the rise in line with the rapid adoption of AI and the ever pressing need to stay ahead in a fast-evolving landscape.
By contrast, most firms expect compliance, risk, and operations headcount to remain stable having been areas of aggressive hiring over the past two years.
As for the main challenges, fee compression remains number one for 60% of firms in the network, up from 53% last year. This can be attributed to pressure on margins intensifying amid rising client expectations and increased rivalry from low-cost providers.
Unsurprisingly, volatility has seen the sharpest increase, surging from 13% to 52%, driven by geopolitical uncertainty and vacillating policy statements particularly on the tariff front from the Trump’ administration. Simultaneously, worries over technology limitations have dropped by 20% from last year, thanks to the progress in AI adoption and broader digital transformation.
The report said that this suggests a shift in focus from internal operational constrains to external market pressures, as firms prioritise navigating uncertainty over infrastructure development.
The importance of AI was also underscored in the report as a means to sharpen a firm’s competitive edge and reduce costs. Currently, 52% of firms in the expert network have integrated AI into some part of their operational process, while another 44% plan to do so. Data analysis and reporting is the main focus for 48% as firms are processing large volumes of data to deliver insights. Portfolio management is second on the list, highlighting the ever-growing confidence in using AI to support investment decisions and optimise performance.
It is not all smooth sailing of course, with the biggest concern – for 68% – being the accuracy of AI, followed by finding the right use cases with 62% struggling to identify clear applications where AI can deliver measurable value. Meanwhile 42% flagged the lack of skilled personnel and the cost of implementation as key barriers. This may be explained by over three-quarters of the network preferring to outsource to vendors rather than developing in-house solutions.
The report also delved deeper into the growing demand for 24/5 trading which has become a hot topic in asset management circles. It noted that while there was a significant enthusiasm for its potential, some firms remain cautious or indifferent to its implications on their operations. In number terms, 54% of the expert network thought continuous trading was either highly or quite beneficial as a way to enhance their market access, improve liquidity and better align their trading operations with global market dynamics.
However, nearly 20% expressed a negative view citing fears around the added costs, operational complexities, and the potential for heightened market volatility. A slightly higher number – 27% – believed it would have no impact on their current, global operations or more focused trading strategies.
Firms were though apprehensive about the cost of extended trading because of operational complexities and increased workload. It found that 79% were going to increase headcount in order to strengthen their trading capabilities while 69% were going to add to back office operational support.
The report noted that trading hours are not the only area to be expanded. Firms are also broadening their product offering with credit derivatives being the favourite for 58%. This is a result of the current unpredictable economic climate and escalating risk of defaults as well as attractive yields in the market.
The report noted a negative shift in sentiment towards cryptocurrencies and digital asset derivatives compared to the findings in its Q4 Asset Manager Report, where crypto was identified as the asset class with the highest expected growth earlier this year.
However, following the volatility in the crypto market, fuelled by meme coin scandals, and regulatory uncertainty, the appetite for these derivatives has dropped sharply to 32% from 57% last year. Expansion plans for sustainable and impact investing derivatives have also fallen sharply – to the bottom of the chart due to the current geopolitical uncertainty as well as the pushback in the US against responsible investment.
