Tag Archives: Investment Management Outsourcing

By 2025, volatility will remain a feature of contemporary markets, shaped as it is by inflationary pressure, geopolitical uncertainty, changing regulation, and technological change. Investment management services now mean more than just portfolio construction; it comprises strategies built upon an integrated, governance-based approach that creates sustainable returns. With an estimated USD 145.4 trillion globally subject to professional management, an ever-growing function of investment management services is to help investors know how to invest when they are faced with complexity. Capital flows and risk regimes are changing, and investment management services will help institutions and individuals navigate uncertainty into growth opportunities.

 

The Escalating Role of Investment Management Services in 2025

With increasing market complexity and investors’ ever-growing aspirations, investment management services are now more essential than ever.

Demand from Institutions and Affluent Clients

Large institutions including pension funds, insurers, sovereign wealth funds are increasingly without portfolio oversight and risk management by specialists. Deloitte’s 2025 outlook warns firms that do not incorporate new technologies or diversify their product offering may lag in an increasingly competitive environment. At the same time, high net worth individuals and family offices are looking for investments with bespoke solutions that integrate both traditional and alternative assets, while relying on service providers to help them utilize and monitor bespoke strategies, including modeling, structuring, and governance.

The Rise of Alternatives & Private Markets

Alternative assets have swiftly become a key element of nearly all institutional portfolios. In the McKinsey Global Private Markets Report 2025, although fundraising has been inconsistent, private markets keep attracting significant capital. Accessing alternative investment opportunities involves deep operations knowledge, valuation, and creation of aligned incentive structures, which are all part of a professional investment management offering.

Technology as the Catalyst

In 2025, generative AI, data engineering, automation, and blockchain have moved from pilot projects to mission-critical systems. Deloitte’s outlook envisions innovative firms that embrace AI in their distribution and operations will create separation from firms that do not. Beyond operations, data integration and transparency are strategic differentiators: according to BNY’s “Future of Asset Management” report, 37% of asset managers say integrating data sources is a top priority over the next 24 months.

Core Functions Defining Investment Management Services in 2025

To achieve the desired impact, investment management services include several integrated capabilities. Here is how each capability begins to evolve in 2025.

Core Functions Defining Investment Management Services

Core Functions Defining Investment Management Services

Portfolio Construction & Asset Allocation

Asset allocation will still be the lead indicator of portfolio results. Managers will overlay strategic, tactical, and regime-aware allocation decisions from equities, fixed income, alternatives, and liquidity. By 2025, some firms will be using dynamic allocation techniques that will use AI and regime-switching models to change exposures to reflect macro or sentiment changes.

Advanced Risk & Scenario Frameworks

Risk management is broadening beyond market risk to include liquidity, operational, regulatory, and climate risks. Asset managers plan to boost investment in advanced risk analytics by over 70% in 2025, with stress testing now covering inflation, supply-chain, climate, and geopolitical shocks to strengthen portfolio resilience.

ESG and Sustainability Integration

ESG has become a core construct rather than a mere adjunct. In January-June 2025, sustainable funds gave 12.5% as median returns in contrast to only 9.2% for their traditional counterparts, thereby proving the alpha potential of ESG. However, with altering volatilities, ESG funds saw outflows to the tune of USD 8.6 billion in Q1. Nevertheless, institutional ESG investments are expected to swell to USD 33.9 trillion by 2026, thereby steadily accounting for more than 21.5% of global AUM.

Research, Valuation & Due Diligence

The rigorous practice of fundamental and quantitative research is still core. In private markets, long-horizon value – 5 to 10 years – will depend upon the depth of due diligence, operations research, and proprietary models with state-of-the-art capabilities. In quant strategies, momentum, regime detection, and tail-risk models are already finding multiple uses when combined with ESG sentiment regimes into new innovative frameworks.

Reporting, Compliance & Governance

As regulatory scrutiny and investor demand for clarity and transparency expand, reporting and compliance become strategic assets. Firms are building proficient tech-based reporting engines and governance layers to enhance auditability, ESG metrics transparency, and fee disclosure. In 2025, compliance spend continues to rise as firms cope with the new pace and dynamics the regulatory space is creating across jurisdictions and more granular ESG rules.

Key Trends Shaping Investment Management Services

Several macro- and industry-level trends continue to reshape investment management services.

Core Functions Defining Investment Management Services

Core Functions Defining Investment Management Services

Global AUM Growth & Regional Dynamics

It is estimated that global AUM will be USD 145.4 trillion by 2025, an approximate doubling from levels in 2016. Looking further ahead, PwC predicts that global AUM will by 2028 reach USD 171 trillion, especially driven by alternative and tokenized assets.

Regionally:

North America remains the largest, underpinned by strong institutional flows.

Europe is innovating concerning ESG and sustainable finance, which also brings new regulations demanding deeper disclosures.

Asia-Pacific is currently the fastest-growing region on the back of increasing wealth and the foundation of institutional capital expansion. Major AUM growth expected from Asia in the projection by PwC.

ETF & Passive Vehicle Expansion

Global ETF AUM grew by 27% in 2024, reaching USD 14.6 trillion, and is projected to grow more than double to 30 trillion by 2029. The increasing release of passive and semi-passive vehicles tends to contrast the older standing traditional active managers, as such, expecting a justification of values from these newer real-time offerings, insights, and nimbleness.

Consolidation, M&A, and Outsourcing

From the industry consolidation perspective, it is going premium as firms seek scale in distribution, infrastructure, and alternatives. PwC states that activity in deals will rebound in 2025, while smaller managers will outsource those non-core functions to focus on alpha and client relationships.

Data Integration & Transparency

Data remains the central heart. In 2025, organizations will prioritize integrating disparate systems, ensuring data lineage, and enabling end-to-end visibility. The firm capable of seamless external-internal data infusing ahead (market, ESG, sentiment, alternative) will enjoy a powerful advantage in insight and execution.

Strategies & Best Practices for Investment Management Providers

To be successful within investment management services, firms must take forward-thinking approaches built on flexibility, technology, and a client focus.

Multi-Asset & Regime-Aware Portfolios

Blending equities, bonds, alternatives, and liquid assets helps manage volatility. Regime detection (inflation, rate, or geopolitical shifts) enables dynamic allocation—using AI to de-risk in stress and capture upside in recovery.

Client-Centric Customization & Reporting

Clients demand tailored mandates- tax-aware, legacy-focused, ESG-tilted. Firms offering flexible, transparent reporting and personalized insights build stronger, longer-lasting relationships.

AI, Automation & Model Scaling

AI enhances execution, optimization, risk, and client engagement. While 60% of firms use AI in distribution, only 11% scale it deeply. Success starts with pilots, data governance, and strong model validation.

ESG as Strategy, Not Add-on

Sustainability is integral to portfolio design and risk management. Firms now embed ESG into thematic and transition strategies, focusing on clarity, metrics, and resilience amid volatile flows.

Outlook for Investment Management Services (2025–2028)

Investment management services are likely to develop in response to macro trends, changing client preferences, and advances in technology.

Democratization of Alternatives

Digital platforms will democratize retail access to previously closed alternative asset classes –fractional private credit, tokenized real estate, and niche strategies.

AI-First Decision Architectures

We may see predictive analytics, scenario engines, and AI-based optimization increasingly form the basis of selection allocation decisions, although there may be some human decision-making involved. Traditional firms that develop these AI-first practices will make it harder for incumbents.

ESG Scrutiny & Verification

With pressure from regulators and investors for accountability, sustainability claims will need to be scrutinized. Disclosure, third-party verifications, and metrics to validate impact will be necessary.

Cross-Border Capital & Emerging Market Growth

Emerging markets are becoming sources of capital and destinations for capital. Managers with more local presence and offerings may start to find new flows in Asia, Latin America, and Africa.

Magistral collaborates with investment firms to offer a complete suite of investment management services. They are research and valuations, AI-based analytics, ESG analysis, fund administration, outsourced CFO, and compliance capabilities. By shifting operational burden, we allow clients to focus on strategy, growth, and investor relations. This helps in improving resilience, scalability, and international competitiveness.

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates, and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modelling, Portfolio Management, and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

Prabhash Choudhary is the CEO of Magistral Consulting. He is a Stanford Seed alumnus and mechanical engineer with 20 + years’ leadership at Fortune 500 firms- Accenture Strategy, Deloitte, News Corp, and S&P Global. At Magistral Consulting, he directs global operations and has delivered over $3.5 billion in client impact across finance, research, analytics, and outsourcing. His expertise spans management consulting, investment and strategic research, and operational excellence for 1,200 + clients worldwide

 

FAQs

What are investment management services?

These are professional services that manage portfolios, allocate assets, conduct research, and ensure compliance and risk oversight for institutions and individuals, aiming to optimize returns while controlling risk.

Why are investment management services important in 2025?

They provide expertise, scale, and technology to help investors navigate complexity, allocate capital dynamically, integrate ESG, and meet escalating regulatory demands.

How do investment management services integrate ESG?

By embedding ESG into risk frameworks, portfolio construction, research scoring, and client reporting, rather than treating sustainability as a separate overlay.

What role does technology play in investment management services?

In 2025, AI, big data, and automation drive efficiency, predictive modeling, client engagement, risk control, and scalable operations across all layers of service delivery.

Introduction

Around the globe, there is a trillion-dollar business of investing in all sorts of assets like equity, both public and private, real estate, and upcoming assets like cryptocurrencies. Once the investment is made, the task on the part of the investor shifts to investment management. There are many activities of investment management that could be outsourced and that is what leads us to analyze the stream of investment management outsourcing. Investment management and hence investment management outsourcing takes all forms depending on the asset being invested in, and the prime business of the asset or investment manager.

Here we take a look at major activities of each type of investment manager or asset manager which could be effectively outsourced to save on costs and improve quality.

Who Should Outsource Investment Management and How?

Outsourced Investment Management

Outsourced Investment Management for different types of Asset Managers

Private Equity and Venture Capital firms

The underlying asset that a Private Equity or a Venture Capital firm invests in is equity. Sometimes it’s for stocks listed on exchanges but most of the time these are private investments, the target of which are start-ups are unlisted companies.

In the PE/VC value chain of investing, there are activities like Fundraising, Deal origination, Deal execution, and Portfolio Management. Quite a few activities in these departments are outsourceable. For fundraising, the activities like investor reach-out, investor profiling, CRMs, newsletters, white papers, and data management jobs could be effectively outsourced. Regarding, Deal origination, the deal pipeline management has a great potential of outsourcing along with initial due diligence. Deal execution processes like valuation and financial modeling are templatized and could be considered. Portfolio management has varied activities and outsourcing potential vary as per the nature of the business of the portfolio companies. Most activities related to Strategy and Marketing have great potential for outsourcing when it comes to Portfolio Management.

Hedge Funds

For the most common type of hedge fund out there, that is a long-short equity hedge fund, multiple activities should be considered for outsourcing. Equity Research is the foremost one. The research that is done for the investors is almost always best to be outsourced. Apart from Equity Research, Fund Administration and Fund Accounting are better done when outsourced. It makes sense from the cost and expertise point of view. Marketing activities almost always have great potential for offshoring.

Real Estate

Managing a real estate asset after the investment comprises standardized work-streams. Most of it relates to collecting data, analyzing it, making reports, and raising red flags if any. Accounting and administration along with research has a great potential for outsourcing

Investment Banks

Investment Banks are into all sorts of assets directly or for their clients. For the varying types of their work pallet, there is varying potential for outsourcing.  For investment banks, activities that are commonly outsourced are Equity Research, Security-based Investment Research, development of excel or other automated models, investment research for private investments, marketing, deal origination, and deal execution. In fact, 30-50% of all activities performed by an investment bank has a solid potential for outsourcing that may be explored

Asset Management Firms

These are for specialized asset managers like managers managing a portfolio of crypto or commodities. There is no one size fits all approach to outsourcing for these asset managers. As a thumb rule, everything related to technology like platform development, automation, website development, or software development can be outsourced. Also, anything that is of support function’s nature like Strategy or Marketing could be looked at.

Models of engagement with the outsourcing vendor

Once you have made your mind to explore outsourcing, the biggest concern is around the way an outsourced vendor or the service provider would work with you and your team. There are three established models of working while outsourcing. These are FTEs, Retainer, and Ad-hoc. Some progressive vendors like Magistral are signing up success-based contracts too.

Outsourcing Engagement Model

Investment Management Outsourcing Engagement Model

FTEs

FTE the most common engagement model for investment management outsourcing.

FTE stands for Full-Time Employee equivalent. It’s like a virtual employee who is operating from a different country. This virtual employee could be coordinated with, on email, video calls, WhatsApp, chats, or any other mode that is suitable to the client and is convenient as per time zone differences. It looks like a person is aligned with the client full time and he works seamlessly with the client. That is always the case, but the vendor, his processes, training, supervision, and culture play a big role in ensuring the continuity of services. A vendor enables the FTE to perform optimally by providing training and desired supervision. The vendor’s processes ensure that the client is insulated from the bad performance of FTE as the work is supervised by more senior resources. In case the individual decides to leave the organization, similarly, qualified and trained professionals are available on the bench for the replacement. That is the reason it makes sense to work with individuals through the service providers who may be an established name in their industry. Working directly through freelancing websites or hiring directly exposes clients to manage costs and risks, which is not the case while dealing with an established service provider.

This also is the cheapest model on per hour basis. But it is inflexible as there may be contractual obligations for a minimum period of support. This case is more prominent when resources are specialized in niche skills

Typical jobs that require FTE engagements are operational, where the offshored team works with the onsite team seamlessly. So, if a task is part of your ongoing investment management operations, mostly it will be outsourced on FTE-based engagement.

Retainer

You know there is a need for outsourcing tasks. At the same time, you think a full-time individual working on these jobs may be overkill. In these situations, where tasks just require some hours every month, the retainer model of engagement comes in handy. Say rather than hiring an FTE or a full-time virtual employee, you would only want 100 hours’ worth of tasks outsourced every month. A retainer is far more flexible than FTEs but costs higher on per hour cost basis. Typical jobs that are suitable for retainer-type outsourcing are newsletters, MIS, reports preparation, and other marketing-related tasks.

Ad-hoc Projects

As the name suggests the engagement is for one-time projects only. A client gives out the scope of the project. The service provider or the vendor provides a proposal that carries, scope of work, timelines, and commercials. The project kicks off after the client signs off the proposal and is paid after the delivery of the project. Almost any project that is strategic and is not expected to be repeated on an ongoing basis is an ideal candidate for ad-hoc based outsourcing. Also, it’s an ideal mode, if you would want to test the services of a vendor before signing a longer-term contract. It is the most flexible outsourcing arrangement as projects may start or end at your convenience, but at the same time, it is costliest in terms of cost per hour basis.

Success Based

Most traditional service providers shy from signing a success-based engagement. The fear stems from the trust deficit, performance fears, and the complications of defining a success scenario. Magistral signs success-based engagements with clients, with whom it has existing relationships. Existing relationships take the risks related to trust deficit and performance. A mutually agreed “success” scenario could also be defined in those situations. The tasks that are outsourced under these arrangements usually relate to fundraising, deal sourcing, and meetings’ set up

Magistral has helped more than 100 clients in outsourcing and offshoring multiple activities related to the Investment Management process. To start a conversation drop a line here.

About Magistral

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modeling, Portfolio Management and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The Author, Prabhash Choudhary is the CEO of Magistral Consulting and can be reached at Prabhash.choudhary@magistralconsutling.com for any queries or business inquiries.