Over the last decade, as their domestic markets have matured, fund managers have rapidly ventured abroad in search of new clients and higher returns, and that trend has speeded up as pension clients demand all-inclusive global mandates, and retail clients demand funds with universal themes.

Our report shows that within 17 years, nearly half of assets under management have come to be held outside the domestic markets, as significant capability has been created in over 70 countries via a mix of new start-ups, organic growth, M&As and local alliances.

This opportunistic mix has slowed down the pace at which potential synergies in front, middle and back offices can be harnessed. Nevertheless, around one in every two managers has managed to create profitable global platforms, with the number likely to grow as pension markets in Europe and Asia continue to be liberalised over the rest of this decade.

The report, sponsored by Citi, shows that the global footprint of the industry has come at a price. Over-rapid growth has produced ambiguities in four distinct operating models now in use. These range from sub-scale independent subsidiaries, with no more than financial integration with the parent company at one end, to open networked scale players with high cultural integration at the other; with multi-boutiques and joined-up franchises in the middle.

Boutiques and franchises share some common elements. Each is a centre of excellence in a well-defined product area. Each seeks to maximise its specialism and minimise overlaps with peers. Each relies on back office outsourcing to secure business integration and operational excellence. Each gives autonomy and space to talented people to generate high conviction ideas and deliver alpha. Each seeks to attract, retain, develop and deploy talent in the craft environment of asset business.

On the downside, however, tensions have been inevitable in revenue sharing, capacity sharing and product development when products of one unit are sold by its peers elsewhere around the world. The problems have been especially notable when overseas units were created through mergers and acquisitions, which hard-wired their operational independence via the terms of acquisitions.

Cultural and linguistic differences have been a major contributory factor, too. As the lingua franca of business, English has not prevented mutual misunderstandings in Asiatic and Continental countries. Worst of all, few CEOs at the centre or in the regions have had the management bandwidth to run a global business. With little forward spend on training in capabilities as diverse as, for example, balancing the inevitable contradictions in the matrix organisation, resolving tensions, rethinking the mental boundaries of businesses and working as equals with people from other nationalities.

However, these are no more than teething problems associated with over-rapid growth. On the upside, more than two in every five asset managers report that going global has delivered positive impacts in a range of areas that collectively influence their ability to grow their business via cross border clients. These include investment performance, business brand, talent process, client attraction, relationships with local regulators and cross-border alliances, to name a few.

Thus, there are clear winners. The rest are striving to minimise the complexity inherent in all global businesses by paying a lot of attention to the nuts and bolts issues in the critical areas like scalability of investment strategies, operational excellence and incremental integration via alliances with the best-of-breed distributors and back-office service providers.

Furthermore, they are also paying special attention to four factors that have underpinned the success of winners so far:
- an incentive structure that promotes cross-referral of business between different business units within an operating model that also aims to capture cost synergies in middle and back offices
- high quality business leadership at the centre and in the regions that raises the bar, delivers strategic leadership, balances contradictions, understands cultural nuances, and builds teams
- a clear performance process that promotes ideas generation, their reality check and their accountability in ways that de-personalise the issues in a multi-cultural environment
- a focal point for generating new ideas and implementing them as product and process innovations that customise the needs of clients in different social and geographical settings.

Globalisation is the future. There is nothing inherent in it that automatically delivers success or failure. Execution is the key differentiator. Its benefits demand hard graft, not bold fixes. The benefits have accrued to those who have thrived on ambiguity in an operating model that delivers clear economies of scale.