Towers Watson’s annual Global Investment Matters report said the complexities of global expansion, sustainability and market positioning are driving the need for change for superannuation funds, sovereign wealth funds and other institutional investors.
The report said by looking to corporate companies, asset owners can learn to become more flexible, nimble and prepared for change.
Towers Watson global head of investment content Roger Urwin said companies regularly reasses their strategy and refocus their activities in order to gain market share, reduce costs, and improve growth or to expand into new markets.
“Asset owners are facing the same pressures to adapt to a changing environment,” said Mr Urwin.
Mr Urwin said Towers Watson believes the world is entering a period of significant change in terms of economies, politics and capital markets, which will “fundamentally affect the landscape in which asset owners compete”.
“Those asset owners whose decision making has become more flexible and efficient at handling uncertainty and ambiguity will be more adept at exploiting the potential opportunities available,” he said.
Towers Watson said managing risk and return in an increasingly complex world is a key driver to adapting internal organisation along with sustainability.
“Asset owners are increasingly grappling with fresh demands on their governance and decision-making structures to meet their long-term performance goals,” said Mr Urwin.
“Organisational change is a useful mechanism by which asset owners can respond to these demands and improve their chances of success in achieving these goals.”
Mr Urwin also said organisations are more likely to succeed if they are aware of their competitive advantages and disadvantages and adapt their decision making accordingly.
“They need to maximise their areas of competence and, importantly, be aware of areas where they have less expertise, and either limit their strategy accordingly or address the weakness,” he said.
According to Towers Watson, the main lesson from the corporate world is that “success comes not to those who wait, but rather those who embrace the change”.
The transformation of governance arrangements by asset owners is leading to a “growing gap in capability between the best and the rest”, said Mr Urwin.
“While the jury is out on exactly how much value can be added from good internal governance, the case that governance is the principal enabler of good performance is unarguable,” he said.
