The investment industry is entering a new age. Tougher competition, tightening margins and stringent regulatory oversight are putting pressure on fund managers. At the same time, institutional investors are demanding diversification in the face of continued market volatility – and all while expecting better governance and higher standards.

Amid the complexity, Carne’s second annual Change report tells a story of both headwinds and tailwinds – fund managers and institutional investors alike are predicting a growth fuelled year ahead despite facing these mounting pressures. We surveyed 251 C-suite fund management executives and 200 institutional investors, collectively responsible for $4.6 trillion assets under management, on their strategy for the year ahead.

Change 2025: Embracing evolution

Siobhan Noble, Managing Director

Necessity is the mother of invention

The investment industry is modernising. Fund managers are increasingly deploying technology as a core driver of the industry’s anticipated growth.

Technology is a broad term. In our Change report, survey respondents specifically refer to AI, automation, and digital tools used in investment decision-making.

Fund managers acknowledge the pivotal role of technology. When asked to identify the top three factors driving innovation, 85% selected technological advancements, up from 69% in our 2024 research.

Additionally, 59% of fund managers believe that the increased use of alternative data (information from non-traditional sources) will significantly drive innovation. This data will enable fund managers to better understand the performance of alternative asset classes in various market conditions.

The drive to innovate through technology is a response to two enduring pressures: rising business costs and stringent compliance requirements. In fund management, necessity truly is the mother of invention.

Accelerating AI

Nearly all respondents in our Change 2025 report use AI in some capacity to support their investment strategies.

Primarily, they leverage AI to generate the additional investment returns that clients demand, as highlighted in this year’s Change report. Specifically, managers use AI for investment idea generation (67% of managers) and portfolio construction (54%).

Moreover, 52% of respondents believe AI is most influential in risk management, 48% in data analysis, and 31% in trading processes. All of these applications can directly lead to better investment returns.

More broadly, most employees in fund management companies use AI to enhance decision making, improve operational efficiency, and create new opportunities for innovation.

Over half (54%) say AI supports compliance with anti-money laundering regulations, while 53% use it for investor communication.

Additionally, AI serves as a selection refinement tool. It helps portfolio managers select investments, operations teams choose third-party suppliers, and clients select managers. The technology now appears pervasive.

Indeed, the 8% of fund management respondents not currently using AI plan to adopt it within the next two years. This rapid adoption mirrors the way the funds industry embraced the internet a generation ago, leading to swift and transformational results.

Technology and third-party outsourcing

Fund managers increasingly need support to identify new sources of capital for growth and to manage costs efficiently while maintaining their core focus on investment returns.

As a result, more managers are turning to third parties to support growth, integrate technology and handle operational, distribution and compliance challenges.

Third party experts offer the expertise for rapid deployment, and this year‘s Change report highlights the significant extent to which managers plan to outsource.

If you would like to know more about the report or how Carne can support your organisation in navigating change successfully, please get in touch at contact@carnegroup.com.

You can also download the full report to learn more.