KPMG Survey: Asset managers grappling with interest rate uncertainty, capital funding concerns & GenAI deployment

Asset managers across the US are balancing short term challenges such as a “higher-for-longer” rate environment while maintaining focus on longer-term objectives including GenAI deployment according to the findings from KPMG’s Asset Management Industry Pulse survey. Further insights in the survey reveal how an uncertain political landscape, new ways of working, and technological innovation are impacting their strategies compared to the start of 2024.

“Despite the FOMC’s decision to hold rates steady in July, the prevailing expectation is for rate cuts to occur later this year. The Fed remains focused on achieving a soft landing—balancing price stability with full employment. Our survey reflects this sentiment, with 63 percent of asset managers anticipating rate cuts in the latter half of 2024.” said KPMG Senior Economist, Yelena Maleyev. “However, given recent signs of a slowdown in the labor market, the likelihood of a rate cut in September seems increasingly probable. For the asset management industry, these anticipated changes in monetary policy could present both challenges and opportunities, as investors adjust strategies to align with shifting economic conditions.”

The survey features insights from more than 120 industry executives, providing their views on some of the key concerns and strategic initiatives within their industry.

Key Survey Findings Include:

• Most respondents (63%) anticipate the Fed will start cutting rates in the second half of 2024, while 37% believe it will wait until 2025 or later. With the economy showing resilience but signs of a labor market slowdown in early August, a September rate cut seems increasingly likely
• Asset managers cite the availability of capital as their top risk, with 48% marking it as their main concern, up from 40% previously. Interest rate uncertainty is also significant, ranking second at 37%
• Respondents expect private debt (43%) and private equity (35%) to remain the top asset classes for ROI over the next three years, mirroring the previous survey results
• The hybrid work model remains dominant in response to the pandemic, with 75% of organizations adopting this approach, an increase from 67% previously adopting the hybrid model
• Despite the buzz around GenAI, asset managers are proceeding cautiously. Forty percent are in the conceptual phase, 25% are developing capabilities, and nearly a third haven't started. Less than 5% have a clear strategy
• The primary barriers to AI adoption are data integrity risks (60%) and lack of awareness and training (53%), which highlight critical areas that need addressing for more effective AI implementation

“The asset management landscape is marked by compound volatility, with immediate challenges like interest rate uncertainty and capital deployment creating significant pressure,” said KPMG’s U.S. Sector Leader for Asset Management, Greg Williams. “To thrive in this environment, asset managers must adopt a forward-thinking approach to their strategy, including their plans for GenAI, that is comprehensive of overall risks and operational needs so they can effectively manage both immediate concerns and future growth opportunities.”

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About the survey:

KPMG LLP (KPMG) conducted a survey in July 2024 (prior to the July 30-31 Federal Open Market Committee meetings), to obtain insights on both economic and strategic initiatives heading into 2024. Responses were collected from more than 120 asset management professionals in the U.S., primarily in c-suite and board roles, representing private fund managers, traditional fund managers, publicly traded entities, and institutional investors, investing across various asset classes including real estate, hedge funds, private debt, and private equity; a majority with $2.5 billion or more in assets under management (AUM).

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