Asset managers are facing mounting risks across their investment portfolios and day-to-day operations, with research from Clearwater revealing widespread increases in market, credit, liquidity, technology and reputational threats.
The global study, which surveyed 250 senior executives at fund managers across the US, Europe and Asia-Pacific, suggests that the challenge is no longer confined to individual areas of risk. Instead, firms are dealing with several pressures rising simultaneously, making effective oversight and timely decision-making increasingly important.
Market risk has increased for 80% of asset managers over the past year, the largest rise recorded across the investment risk categories examined. More than a third (34%) describe that increase as dramatic.
Credit risk has also become a significant concern, with 77% of managers reporting an increase and 51% saying it has risen dramatically. Meanwhile, 71% have experienced higher liquidity risk, with 36% describing the increase as dramatic.
Concentration risk presents another challenge, having increased for 71% of firms.
Taken together, these findings suggest that managers are having to consider several interconnected pressures when constructing and managing portfolios. As market conditions become more difficult to predict, understanding exposures across asset classes and maintaining sufficient liquidity become increasingly important.
The risks extend beyond investment performance. Three-quarters of firms (75%) report increases in people and process failures, including issues such as trade execution errors and inadequate internal controls.
Business continuity risk has risen for 80% of asset managers, with 32% describing the increase as dramatic. Technology and cyber risk has also increased for 73% of firms, half of which say the rise has been dramatic.
Yet technology and cyber risk stands out when managers consider the challenges ahead. Almost two-thirds (62%) identify it as their greatest concern over the next 12 months, making it the leading anticipated threat.
Operational complexity is contributing to the challenge. As portfolios expand and reporting requirements intensify, fragmented systems, manual reconciliations and delayed reporting can create inefficiencies and increase the potential for errors, particularly during periods of market stress.
Reputational risk has increased for 69% of firms over the past year, with 44% describing the rise as dramatic. Negative media coverage, legal disputes and poor performance that prompts client outflows can all undermine confidence in an asset manager.
Environmental, social and governance (ESG) risk has also increased for 77% of firms, while 72% report rising competition risk as managers contend with the potential loss of market share through poor performance or high fees.
These findings highlight the breadth of the pressures facing the industry. Firms must protect investment performance while maintaining operational resilience, meeting expectations and preserving client trust.
When asked about their greatest concerns over the next 12 months, managers place liquidity risk second, at 47%, closely followed by credit risk at 46%. Concentration risk is identified by 37%, while 35% point to people and process failures. Market risk, despite recording the largest increase over the past year, is cited by 28%.
The distinction suggests that the risks rising fastest are not necessarily those managers fear most in the immediate future.
For asset managers, the priority is to understand how these pressures interact and ensure that risk information is timely, comprehensive and actionable. Firms that can monitor exposures, liquidity and portfolio concentrations effectively will be better equipped to respond to changing conditions.
Ultimately, managing uncertainty requires more than reacting to individual threats. It means building the visibility and operational resilience needed to make sound decisions when several risks are rising at once. Clearwater helps asset managers monitor and model complex portfolios, so teams can act on their exposures as conditions change.
To see the full data on how risks are rising across investment and operations, download the report, The Crowded Trade.