Annual Asset Manager Conference 2024

Annual Asset Manager Conference October 29 – 4. November 4, 2024

In fall 2024, the KENFO Annual Asset Manager Conference took place for the fifth time. This time, the conference focused on the upheavals in the US financial sector as a result of the financial market crisis and digitalization as well as the influence of artificial intelligence on software investments.

James P. Gorman, Executive Chairman of Morgan Stanley spoke at the KENFO 2024 Annual Asset Manager Conference on October 29 about, among other topics, the upheavals in the US financial sector and the importance of corporate culture and governance for a globally active investment bank. Prior to assuming his current role at Morgan Stanley in January 2024, Gorman was CEO since January 2010 and Chairman since January 2012.

­­Mr. Gorman provided an overview of how he steered Morgan Stanley through major changes during his tenure. Shortly after he had become CEO, the 2008 financial crisis reshaped the landscape of investment banking in the US. Following the financial market crisis, several major players such as Merrill Lynch and Lehman Brothers disappeared from the market or were taken over by other institutions. The result was a massive consolidation. In contrast, European banks are still in a recovery phase. In Mr. Gorman’s opinion, the European banks waited too long to restructure after the financial market crisis. Many banks are still not clear whether they want to be regional players or global leaders. In principle, Mr. Gorman sees enormous value in the European banks.

After Morgan Stanley emerged from the financial market crisis, it was Mr. Gorman’s aim to build a more stable business and to prepare the bank for the next rough times in financial markets by rightsizing the risks. Under his leadership, Morgan Stanley diversified further into wealth management. Today, Morgan Stanley generates growing client activity through various channels, including the E*TRADE platform, workplace and the advisory channel. Morgan Stanley's approach is to think about the function that the bank offers to its very diverse customers. Morgan Stanley's success lies in delivering what the various customers need.

Technology has massively changed the role of large investment banks such as Morgan Stanley, and most of today’s business depends on technology. Morgan Stanley now has close to 17,000 employees working in technology and has invested billions in a technology platform. Data integrity and privacy are important issues for Morgan Stanley.

In terms of ESG, a significant number of clients want an ESG approach with a different weighting of “E”, “S” and “G” in each case. Therefore, Morgan Stanley's philosophy is to offer what clients think is best, but not to tell them how to invest. In Mr. Gorman’s opinion “ESG” has become too broad a term. In his view, a more precise description would be “investing for the impact one is trying to achieve“.

As for geopolitics and globalization, Mr. Gorman believes that there have always been geopolitical issues. Since geopolitical forecasts are difficult to make, it is important to be prudent with exposures. Geopolitical relations between the USA and China will be of central importance for global trade and economic development. The US economy is very dependent on China. China itself is in turn dependent on the rest of the world. Against this backdrop, tariffs have a significant impact on markets. Mr. Gorman's outlook for the next few years is not overly optimistic.  

While transforming the business model, Mr. Gorman also reshaped the culture of Morgan Stanley which had been founded 88 years ago. He underlined that success in building a strong, cohesive culture in a global and diverse organization with more than 80,000 employees is based on a very basic principle: the management team itself must exemplify the culture.

Executive Summary Orlando Bravo at Kenfo’s 2024 Annual Asset Manager Conference*

Orlando Bravo, Founder and Managing Partner of the private equity firm Thoma Bravo spoke at the KENFO 2024 Annual Asset Manager Conference on November 4 about “How AI is Reshaping the Landscape of Software Investing”. 

At the beginning of his presentation, Mr. Bravo provided an overview of how the software industry has developed over the last 25 years. 

In the 2000s, business software was primarily an “on-premise” solution that was used to solve certain tasks such as accounting or order management in companies.

Since 2010, a new era has emerged: Software as a Service (SAAS). Software is now much easier to implement and use, data is stored centrally in cloud environments and instead of solving specific tasks, software now controls the entire business processes of companies. The way in which software is purchased has also generally changed from a license model to a subscription model.

The next big evolution in the software industry started around 2024, the era of “GEN AI”. AI is expected to become an integral part of software solutions, significantly simplifying the deployment of software, expanding its use in companies and opening up completely new use cases.

Generative AI´s Expanding Role

GenAI enables the creation of synthetic content (video, text, images) and improves automation in decision-making and data processing. Its integration is expected to make software more adaptable and efficient across industries. AI-driven solutions are enhancing everything from cybersecurity to costumer experience and workforce planning.

This creates significant market opportunities: Global enterprise spending on generative AI solutions is forecast to increase from USD 19.4 billion in 2023 to USD 151.1 billion in 2027, of around 85%. This reflects the enormous opportunities for value creation and innovation in the technology sector.

Practical examples of AI applications

Automated access authorizations for company users.

Use of deep learning to monitor and optimize cloud infrastructures.

Implementation of AI-supported insights tools for customer satisfaction and strategic personnel planning.

Deep learning to automate and monitor customers' cloud environments, training of LLMs (Large Language Models) for email cybersecurity and email blocking etc.

Mr. Bravo emphasized that cybersecurity is becoming increasingly important: As AI becomes more widespread, the threat landscape is also expanding. Thoma Bravo has invested over 30 billion dollars in cybersecurity companies since 2021 to combat emerging risks such as ransomware attacks.

Promoting growth and protecting values through responsible AI governance

Mr. Bravo described Thoma Bravo's approach to AI as a balance between growth and governance, with a focus on privacy, bias management and sustainable practices. Governance frameworks would be adapted to ensure transparency and accountability in the use of AI.

With many years of experience in navigating market transitions (e.g. SaaS and cloud adoption), Thoma Bravo sees itself as a pioneer in the use of generative AI. By focusing on proprietary data, established distribution networks and deep customer relationships, Mr. Bravo believes its portfolio companies are very well equipped to create value in the age of AI.

Outlook 
Generative AI represents a transformative opportunity for both the software industry and private equity investments. As AI becomes an integral part of business solutions, it is expected to reshape market dynamics and create unique opportunities for innovation and growth.