Asset owners turn to technology, outsourcing, and risk management to adapt to global challenges
Asset owners are sharply increasing allocations to private markets and boosting liquidity management amid rising market volatility, regulatory pressures, and rapid technological change, according to Northern Trust.
Asset owners on average continue to favour equities (42 percent) and fixed income (27 percent).
However, allocations to private market assets have grown to 13 percent of the average portfolio, with 86 percent of respondents reporting some exposure to private markets.
Hedge funds, absolute return investments, and other diversifiers account for allocations from 68 percent of respondents.
Private debt, including commercial real estate, private credit and direct lending, and residential real estate, has become central to many institutional portfolios.
Among private market investors, 21 percent have also allocated funds to cryptocurrencies and other digital assets.
Liquidity management has become significantly more important, with 60 percent of asset owners noting an increased focus. Cash allocations now average 11 percent of global portfolios.
Melanie Pickett, head of Asset Servicing, Americas at Northern Trust, said asset owners “maintain sophisticated portfolios in a time marked by economic and geopolitical uncertainty” and must execute their strategies while managing costs and navigating regulations.
She added that their data “offers asset owners in North America valuable insights into their peers’ current priorities and trends shaping the market,” helping leaders benchmark strategies and focus resources as they plan for their organizations.
Technology adoption and operational efficiency have become priorities for asset owners globally.
Fifty-one percent of respondents said they are focusing new technology spending on portfolio analytics tools, while 48 percent are increasing spending on compliance and regulatory reporting.
Half of the respondents believe that technology product implementation and target operating model design from service providers would most effectively enhance their operations.
Another 43 percent cited better integration of applications from providers as the most valuable improvement.
James Wright, head of Asset Owners, EMEA at Northern Trust, said “asset owners in EMEA are increasingly recognizing the value of technology in addressing both operational and investment risk.”
He noted that the trends in EMEA align closely with survey findings, especially around the growing importance of technology and enhanced risk management.
Wright added that as regulatory pressures rise and the need for stronger data management grows, asset owners are integrating technology “to optimize operations and manage risk more effectively.”
Risk management remains a major concern for asset owners.
Respondents identified interest rate changes, geopolitical and domestic political instability as the top external investment challenges, followed by investment fees and the effects of climate change.
Liquidity risk ranked as a top-three concern for 54 percent of asset owners surveyed.
Regional differences also emerged. Asset owners in EMEA and APAC allocate a lower percentage to equities and a higher percentage to cash compared to US counterparts.
Risk priorities, technology investment levels, and outsourcing preferences varied across regions.
Outsourcing continues to be a strategic focus, especially among APAC asset owners. Angelo Calvitto, head of Asia-Pacific at Northern Trust, said “in APAC, asset owners are relying on outsourcing and technology adoption to drive operational efficiency.”
He noted that many are leveraging service providers to scale operations and focus on core activities, particularly in administration for alternative investments.
Calvitto added that “outsourcing is playing a key role in helping asset owners streamline processes and enhance overall operational performance.”
Among those outsourcing investment operations, the most commonly outsourced functions are document management and regulatory reporting (both at 49 percent), followed by trade execution (45 percent), performance and analytics reporting (45 percent), and accounting administration for alternative investments (45 percent).
In its newly released “Asset Owners in Focus: Global Asset Owner Peer Study 2025,” Northern Trust surveyed 180 global asset owners with investment portfolios ranging from US$1bn to over US$500bn.
