I’ve always thought that our capacity to understand, with true, actionable clarity, the changes that are occurring around us always lags by a few inches, or yards. We deal with this the best we can. Many of us are in professions where we need to have a measure of certainty about things so we develop the language to define reality. But the fact is we lag reality. That’s actually a good thing.
I call it the “reality gap.” I believe that that “distance” gives us perspective. And perspective gives you the opportunity for analysis and more importantly, reflection. Reflection is not navel gazing. It’s using experience, and insight, to make purchase on meaning, to learn, and share that learning. So, do all this right and reality gaps are really great opportunities.
What are the big changes we’re seeing that include such gaps? Here are three:
Asset Management is Changing: With risk free returns so low (thank you Federal Reserve) and the performance of listed equity so strong now (again, thank you Fed), for so long, the world of asset management is in a curious situation. Investors need higher returns but are mindful that listed equity may have run its course and they therefore also feel the need to de-risk.
Money always finds its way to flow to better, prospective, returns. That’s the nature of Wall Street. The direction it’s going is to both driven by new product ideas and the ambition to introduce a wider range of alternatives to the private wealth and defined contribution markets. Innovation like this is good. The gap here is about educating investors who have one foot in where they are now and the other in where they know they need to be. The asset management industry is fortunately stepping up to that challenge well.