Key Takeaways:
- Private credit financing offers flexibility and will remain a key tool for asset managers navigating deals in 2025.
- Evolving tax policies demand proactive risk management and scenario modeling to mitigate potential risks.
- Asset managers are adopting AI and outsourcing to enhance tax compliance, efficiency, and scalability.
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You might be wondering what to expect this year when it comes to asset management. Overall, asset managers are anticipating a 2025 characterized by significant change and are seeking stability as much as possible. Potential tax policy shifts are introducing new challenges and complications for investors, prompting asset managers to consider new strategies. Technology and the regulatory environment continue to evolve rapidly, requiring asset management firms to keep up or risk losing competitive advantage. Economic and labor trends are shaping workforces, causing leaders to embrace emerging technologies and staffing models to fill gaps. As the asset management industry continues to evolve, you should proactively strategize for the year ahead.
Here’s a glimpse into the top asset management industry trends and predictions you should be aware of for 2025.
1. Alternative Financing Will Continue to be an Attractive Option for Investors
Private credit has become one of the most common sources of financing for deals in recent years. In fact, nearly half (46%) of private equity (PE) fund managers say private credit is their preferred source for financing acquisitions, according to the 2024 BDO Private Equity Portfolio CFO Outlook Survey. Private credit offers more flexibility than traditional bank loans, thanks to less onerous covenant conditions speeding up the dealmaking process. With the challenging landscape, asset managers will likely continue to lean on private credit in 2025.
2. Changing Tax Policy Will Bring New Challenges
Potential tax policy changes brought on by a new Congress and administration may present challenges for businesses. This could include changes to corporate tax rates, trade and tariff policies, and the future of certain expiring provisions within the Tax Cuts and Jobs Act (TCJA). Shifts in these areas will shape investment strategies and could affect asset management companies’ tax liability or expose them to potential new tax risks.
According to the 2024 BDO Tax Strategist Survey, less than half (43%) of asset management leaders have a tax risk mitigation and response strategy in place and proactively prepare for changes that affect their tax risk profile. Although policy changes take time to implement, asset managers must prepare now. For example, scenario modeling potential tax outcomes and risks can help leaders forecast impacts and develop tailored strategies to address them. If your company neglects to build a risk mitigation strategy, you could expose yourself to unnecessary risks in the year ahead.
3. Funds Will Embrace New Tax Technologies
Among the slate of risks confronting your asset management company, outdated tax technology is one of the most pressing and potentially harmful. More than one quarter (27%) of asset management tax leaders in the BDO Tax Strategist Survey report outdated technology as their top source of tax risk. As tax requirements deepen and expand, you’ll need to keep pace by leveraging the most up-to-date technology.
Asset management leaders are aware of the urgency, with 60% reporting plans to increase their tax technology investments in the coming year. For many, that means embracing the latest innovations. Forty percent report plans to invest in artificial intelligence (AI) for their tax departments. The granular nature of financial data in tax makes it an ideal proving ground for AI, which can quickly sift through large amounts of data to analyze patterns or generate summaries for tax reporting. Leaders exploring AI should start by piloting a small-scale AI project to test AI applications in real-world tax scenarios. A gradual ramp up will allow for iterative learning and strategy refinement.
4. More Asset Management Leaders Lean on External Providers
As asset management leaders increase investments in compliance, tax risk management, and technology, many are also looking to external providers to help address talent and skill gaps. According to the BDO Tax Strategist Survey, 57% of asset management leaders are investing more in outsourcing or co-sourcing for additional tax help. Tax outsourcing and co-sourcing can be particularly beneficial in risk management as internal teams may not have enough time or in-house knowledge to conduct more strategic activities like developing a tax risk management plan. Bringing in external resources can help close that gap. Outsourcing and co-sourcing arrangements also offer improved scalability and cost-effectiveness, allowing funds to ramp up or down depending on their needs.
You might want to consider an external advisor, who can help you address various tax challenges, including:
- Navigating state and local tax considerations, which can vary in jurisdictions across the U.S. and can benefit from localized knowledge and relationships.
- Forecasting, understanding, and preparing for potential policy changes.
- Integrating and adopting technology, especially around AI, which may require enhanced data security measures or training to overcome employee knowledge gaps.
- Managing complex global tax compliance and transfer pricing requirements.
- And much more.
Preparing Asset Managers for 2025 with MGO
MGO works with asset management firms to address the challenges and opportunities defining 2025. Our services help firms navigate tax policy changes, adopt advanced technologies like AI, and develop effective strategies to mitigate risk. We provide guidance on private credit financing, global tax compliance, and scalable outsourcing solutions tailored to meet organizational needs.
By focusing on solutions that align with your goals, MGO supports firms in optimizing operations, enhancing compliance processes, and adapting to a changing landscape. Whether preparing for regulatory shifts or implementing new tax technologies, MGO helps asset management firms build strategies for long-term success. Contact us to learn more.