The world 20 years from now: what does it mean for the future of investment management

As a Director of CFA Society Australia, I was honoured to take part in the historic gathering in Sydney, where the global CFA Institute Board of Governors convened for only the second time in the 62-year history of the CFA Program. In preparing for my role as a table captain for the Investment Leader Forum’s interactive workshop, I pulled together a variety of perspectives on emerging technologies, demographic changes, and the evolving skill sets required for tomorrow’s investment analysts. Through this preparatory research, I also gained a deeper appreciation of how AI and data-driven strategies are reshaping our industry - reinforcing a key theme that we are at the cusp of significant transformation in the way we invest, manage portfolios, and develop talent. It was insightful to hear the discussions that captured the complexities and opportunities of our rapidly evolving industry.

Key Insights: Preparing for Industry Transformation

Australia’s investment management industry is at a pivotal moment. Rapid technological advancements, demographic changes, evolving regulations, and the growing importance of sustainable investment are reshaping both the nature of firms and the portfolios they manage. The analyst of the future will be someone who balances cutting-edge technical and quantitative skills with interdisciplinary knowledge, strong soft skills, and unwavering ethical standards.

The Key Insights were informed by the following information collated in response to these 3 questions:

1. What will most shape the industry of the future?

2. What will most shape the portfolio of the future?

3. What skills are most needed for the analyst of the future?
   

1. What Will Most Shape the Industry of the Future?

A. Technology and Digital Transformation

• Artificial Intelligence (AI) and Machine Learning (ML)

  • AI-driven research tools will enable more efficient screening, analysis, and trading of assets.

  • Alternative data (e.g., social media sentiment, geospatial information) will be processed by ML algorithms to uncover new sources of alpha.

  • Automated processes (e.g., compliance checks, client reporting) will free professionals to focus on higher-value activities.

• Blockchain and Distributed Ledger Technologies (DLT)

  • Tokenisation of assets and blockchain-based settlement platforms may lower costs and increase transparency.

  • Smart contracts could streamline tasks from trade settlement to corporate actions, potentially reducing operational risk.

• Cybersecurity and Data Privacy

  • As reliance on digital systems grows, the risk of cyber threats becomes more pronounced, making robust cybersecurity crucial.

  • Protecting personal and financial data will become an increasingly integral part of maintaining stakeholder trust.

B. Demographic and Social Shifts

• Ageing Population

  • In Australia and other developed markets, an ageing population will influence products related to retirement planning, insurance, and pension fund allocations.

  • This shift will likely push the industry to focus more on decumulation strategies - managing the drawdown of retirement funds.

• Generational Wealth Transfer and Client Preferences

  • Younger generations, such as Millennials and Gen Z, typically seek greater transparency, digital access, and ethical or ESG-oriented investments.

  • Firms may need to reinvent their service offerings to appeal to these new investor segments.

C. Regulatory and Policy Environment

• Evolving Global Regulation

  • Regulators worldwide are trying to keep pace with innovations such as cryptocurrencies and decentralised finance.

  • Collaborative efforts between government entities and industry participants will aim to protect investors while encouraging responsible innovation.

• ESG and Sustainability Mandates

  • Regulators are increasingly demanding disclosure of ESG risks, carbon footprint, and supply-chain sustainability.

  • Climate-related policies could materially affect how portfolios are constructed and managed.

D. Emerging Markets and Global Interconnectivity

• Shifting Economic Power

  • Rapid growth in Asia-Pacific and other emerging regions will reshape global capital flows, requiring broader geographical expertise.

  • Cross-border investments will remain complex, necessitating familiarity with diverse regulatory environments, currencies, and cultural nuances.

• Evolving Geopolitical Landscape

  • Rising geopolitical tensions and changes in global trade agreements may affect market stability.

  • Navigating trade uncertainties and national interests will be essential for long-term success.

While all four factors - technology, demographics, regulation, and the rise of emerging markets - are poised to significantly shape Australia’s investment landscape, demographics may ultimately exert the greatest long-term influence.

Why Demographics Matters Most

1. Superannuation and Retirement Dynamics

   • Australia’s compulsory superannuation system means an ageing population has substantial retirement assets - among the largest pools of managed capital in the world.

   • As Baby Boomers enter their decumulation phase, the financial industry will be challenged to create products focused on generating steady income while safeguarding against longevity and inflation risks. This demographic transition will likely lead to product innovation and a strategic shift in asset allocations (e.g., growth-to-income tilt).

2. Changing Investor Preferences

   • Successive generations (Gen X, Millennials, and Gen Z) bring evolving attitudes towards environmental, social, and governance (ESG) factors, digital interfaces, and investment personalisation.

   • These preferences influence everything from the types of products offered (e.g., ethical or impact funds) to the methods of engagement (e.g., online platforms, robo-advice, or tailored portfolios).

3. Socioeconomic Pressures and Policy

   • An ageing electorate exerts pressure on government policy regarding retirement income, taxation, and healthcare funding.

   • Regulatory bodies will likely respond with rules aimed at protecting older investors, preventing exploitation, and ensuring adequate retirement income—further shaping the industry’s product offerings and advice models.

Interaction with Other Factors

• Technology: Rapid tech advancement will amplify demographic trends by enabling more personalised retirement solutions, digital advice for time-poor working Australians, and deeper analytics for risk management.

• Regulation: Policies related to superannuation contributions, retirement drawdown rates, and financial advice standards will continue evolving in direct response to demographic shifts.

• Emerging Markets: Although rising markets in Asia and beyond offer diversification and growth, Australian investors’ capacity to chase these returns will still be filtered through the lens of demographic-based risk profiles and retirement horizons.

Technology, regulation, and emerging markets are undeniably critical. However, given Australia’s uniquely large superannuation system and rapidly ageing population, demographic forces are likely to have the most pronounced and wide-ranging impact on the investment industry over the coming two decades. By understanding and anticipating these shifts, financial professionals can design innovative strategies and products that serve both the near-term needs and the long-term well-being of Australian investors.

2. What Will Most Shape the Portfolio of the Future?

A. Broader Range of Investable Assets

• Alternative Assets

  • Private equity, private debt, real assets, and infrastructure are gaining traction, with lower minimums increasingly opening these investments to a wider audience.

  • Tokenisation may further democratise access to traditionally illiquid asset classes (e.g., property, private companies).

• Digital Assets and Cryptocurrencies

  • Despite volatility, cryptocurrencies and other digital tokens could serve as diversifiers or offer unique risk-reward profiles.

  • Central Bank Digital Currencies (CBDCs) may emerge as new instruments, potentially influencing cash management and settlement processes.

B. ESG Integration and Impact Investing

• Sustainability as a Central Driver

  • ESG factors are moving from a ‘nice-to-have’ overlay to a core component of investment research and strategy.

  • Impact investing, where measurable social or environmental outcomes are pursued alongside financial returns, is expanding rapidly.

• Climate Adaptation and Resilience

  • Climate risk (both physical and transitional) is likely to be a major consideration in portfolio construction.

  • Sectors such as renewable energy, water technology, and carbon reduction could become more prominent in portfolios.

C. Personalisation and Customisation

• Direct Indexing

  • Advances in technology allow investors to tailor portfolios- excluding certain industries or emphasising particular ESG factors - essentially creating a customised index.

  • This trend might blur the lines between active and passive strategies by enabling new forms of personalised alpha generation.

• Robo-Advisers and Digital Platforms

  • Automated platforms that offer low-cost portfolio management will continue to grow, appealing particularly to younger or smaller-scale investors.

  • As AI matures, robo-advisers could evolve beyond simple asset allocation to actively incorporate behavioural data and advanced analytics.

D. Managing New Forms of Risk

• Systemic Risks and Market Turbulence

  • Interconnected financial markets increase the potential for contagion, especially where leveraged or derivative-based products are widespread.

  • Robust stress testing, scenario analysis, and tail-risk hedging strategies will remain vital to managing downside exposures.

• Shifting Correlations

  • Traditional correlations between asset classes (e.g., equities and bonds) may not hold in prolonged low-rate or inflationary environments.

  • New factors - such as tech-driven disruptions, geopolitical tensions, and sustainability risks - could reshape traditional portfolio construction methods.

Each of the four innovations - tokenised assets, ESG-driven strategies, personalisation, and advanced risk analytics - offers distinct avenues for reshaping future portfolios. However, the most transformative approach is likely to be ESG-driven strategies, primarily because sustainable investing now goes well beyond compliance or ethical considerations. Increasingly, it embodies a redefinition of risk and return. Investors and regulators worldwide are recognising that climate risk, resource scarcity, and social inequalities can materially affect financial performance. As organisations integrate ESG considerations into every level of their operations, these factors will shift from being a peripheral overlay to a central driver of portfolio construction.

Tokenised assets will also play a significant role, particularly by democratising access to asset classes - such as real estate, private equity, or infrastructure - that were previously restricted by high minimum investments or illiquidity. Through fractional ownership on blockchain platforms, we may see broader participation and improved market efficiency. This innovation could integrate with traditional portfolio strategies by adding liquidity and diversification benefits to asset classes that used to be prohibitively difficult to trade. Still, tokenisation faces regulatory and security hurdles before it achieves widespread adoption.

Personalisation (via direct indexing or custom-tailored investment solutions) and advanced risk analytics could be viewed as complementary tools that help integrate ESG, tokenisation, and other emerging approaches within the traditional portfolio framework. Enhanced analytics, fuelled by AI and machine learning, will allow investors to better understand nuanced risk factors - like climate risk or unique tokenised asset behaviours - and thus create deeply customised portfolios. Meanwhile, personalisation could reinvent how we define “passive” and “active” investing: although the underlying approach might be index-based, the end product can be highly bespoke, reflecting each investor’s values, risk tolerance, and financial goals.

Ultimately, these innovations are unlikely to replace traditional approaches outright; rather, they will merge with proven portfolio construction principles such as diversification, asset allocation, and risk-adjusted performance measurement. The pace of this integration will depend on regulatory developments, technological advancements, and shifting investor sentiment. Yet it seems clear that portfolios of the future will evolve to accommodate and embrace these new possibilities, offering greater transparency, efficiency, and alignment with investor preferences than ever before.

3. Which Skills Are Most Needed for the Analyst of the Future?

A. Technical and Quantitative Abilities

• Data Science and Programming

  • Proficiency in languages such as Python, R, and SQL will be vital to handle large datasets, automate processes, and build models.

  • Familiarity with AI and ML algorithms can help filter vast amounts of data to identify trends or predict outcomes.

• Mathematical and Statistical Literacy

  • Strong quantitative skills underpin effective model-building and risk assessment.

  • Analysts must also remain aware of the assumptions and limitations of models, especially in the context of ethically managing client data and avoiding algorithmic bias.

B. Interdisciplinary Knowledge

• Sector and Domain Expertise

  • As new industries (e.g., biotechnology, clean energy, advanced manufacturing) emerge and grow, deep domain knowledge becomes a competitive advantage.

  • Analysts with global perspectives and cultural sensitivity will be better positioned to understand complex supply chains and cross-border investment opportunities.

• Sustainability and Climate Science

  • Interpreting ESG metrics and climate data requires a foundational understanding of environmental science, regulatory frameworks, and emerging sustainability technologies.

  • A strong grasp of climate risk modelling and carbon market developments is becoming increasingly important.

C. Soft Skills and Leadership

• Critical Thinking and Adaptability

  • Rapid change in technology and markets calls for analysts who can adjust quickly, revisit assumptions, and remain open to new methodologies.

  • The capacity to pivot investment theses in response to disruptions - be they technological breakthroughs or macroeconomic shifts - will be highly valued.

• Communication and Collaboration

  • As automation handles many routine tasks, analysts differentiate themselves through clear communication of complex ideas to both technical and non-technical audiences.

  • Collaboration across multidisciplinary teams (e.g., data scientists, climate experts, behavioural economists) will be crucial for holistic insights.

D. Ethical and Cultural Awareness

• Professional Integrity and Judgement

  • Access to bigger and more varied data sources can raise privacy and ethical concerns; analysts need a strong ethical framework to guide decisions.

  • Cultural awareness and empathy can also help in understanding and meeting diverse client needs in a globalised market.

• Commitment to Ongoing Learning

  • Technological, regulatory, and market landscapes will continue evolving, making lifelong learning essential.

  • Professionals who consistently update and broaden their skill sets - through courses, certifications, and hands-on experiences - will maintain relevance.

The single most critical capability for the analyst of 2045 will be a combination of advanced data fluency and strong human-centred skills. On one hand, proficiency in data science, programming, and machine learning will be essential for extracting insights from rapidly expanding and ever-more complex data sets. On the other, a distinctly human layer of critical thinking, ethical awareness, and communication skills will be what differentiates analysts in an era where AI takes on many tasks that are purely quantitative.

Why This Matters

• AI and Automation: As machines grow more capable of absorbing and processing information, the human role will shift towards interpreting nuanced results, applying ethical judgement, and asking the ‘why?’ behind the data.

• Global and ESG Imperatives: With rising focus on environmental, social, and governance issues - both from regulators and investors - analysts will need broader contextual understanding and the interpersonal skills to engage diverse stakeholders.

• Rapid Change: Markets, products, and regulations evolve quickly, so adaptive thinking and the ability to synthesise cross-disciplinary knowledge will become key for staying ahead.

Practical Ways to Develop These Competencies

• Ongoing Technical Upskilling: Commit to learning programming languages (e.g., Python, R) and analytics tools. Encourage your workplace to offer training or sponsor professional courses, and carve out time each week for self-directed study.

• Cross-Functional Collaboration: Seek opportunities to work with data scientists, software developers, and other specialists. Exposure to different perspectives can cultivate well-rounded problem-solving skills.

• Ethics and Governance Awareness: Stay abreast of emerging standards around data privacy, AI governance, and ESG regulations. Engage with professional associations or take part in targeted workshops to deepen your understanding.

• Communication Mastery: Focus on translating complex data-driven insights into actionable recommendations. Being able to tell a compelling story with data - for both technical and non-technical audiences - can elevate an analyst’s influence.

By blending advanced technical knowledge with soft skills and a strong moral compass, today’s professionals will be well positioned not just to survive, but to thrive in the increasingly data-driven, dynamic world of 2045.

Ashley Kerfoot