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Asset Management Evolves, Yet Skill Set Remains Essential

February 19, 2015, 07:00 AM

As the equipment finance industry has matured over the past few decades, so too has the role of the asset manager. As I reflect on the industry and prepare for the upcoming ELFA Asset Management Conference in Florida, I am struck by the evolution of our role within the industry and the impact technology, in particular, has had on our day-to-day responsibilities.

Although the role of the asset manager is changing, the skill sets needed remain the same. Our primary responsibilities require the ability to evaluate equipment and determine how essential that equipment is to the operations of the company. However, the conversations around value and the way we determine it are changing significantly.

Technology remains one of the most important sectors in the equipment finance industry. With the decrease in the number of operating leases used to finance technology expenditures, the role of the asset manager has become more focused on essential use than the traditional role of discussing and evaluating residuals on hardware.

The cloud services market is expected to grow from $80 billion to $200 billion over the next few years. As the market continues to shift from “owning” equipment to managed services and cloud providers, the equation changes drastically for asset managers. I anticipate that more and more, our responsibilities will lie in analyzing essential use and vendor recourse as we move away from conversations about residual value. Where we used to look at how much resale value a piece of equipment would have at the end of the lease term, we’re now placing value on the importance of a specific software installation or cloud solution to the overall success of the company.

While the shifting technology industry is having a big impact on the role of the asset manager, technology is also making some aspects of asset management easier than ever. For example, over the last 20 years, technology has made it substantially easier to collect market data points. Data that used to take hours on the phone with brokers to obtain can now be found online in three minutes. And many service providers, like aircraft and medical valuation consultants, have made their services available online, which creates additional efficiencies for asset managers.

In general, technology tools for managing portfolios continue to become more and more sophisticated. This means it is now much easier to pull reports on asset portfolios, analyze and understand residual trends, and pull more meaningful reports, which gives us all a much clearer understanding of our residuals, equipment exposures, and overall portfolio performance.

Technology has also made it easy for many asset managers to leave their corporate jobs and open up shop for themselves as consultants. Much of the work that used to require in-house asset managers can be outsourced to senior-level asset managers with decades of experience. The rise of independent, third-party appraisers, advisors and asset recovery experts makes it easier both for smaller banks to get into equipment finance and for large banks to find experts in specific verticals as necessary.

Lease accounting changes and regulatory compliance are two more factors that are having major ramifications for both the equipment finance industry overall and for the role of the asset manager, in particular. We’ve recently seen new standards that require impairment of assets based on market value, as well as stricter enforcement of those standards. As a result, asset managers are under significantly more pressure to complete portfolio reviews and impairment analysis, while there are very few standards in place for handling these tasks. Although pressure from regulators, investors and banks increase, there remain no common standards and very few best practices for performing residual reviews to determine if impairments need to be taken.

As technology continues to improve, more and more services move to the cloud, and regulation and lease accounting changes are updated to meet the changing needs of the market, I anticipate we will see the role of the asset manager continue to evolve. More of our time will be focused on advising on essential use, and I expect we will see even greater time and cost savings –- as well as improved reporting –- from technology enhancements.

We’ve seen the asset management profession mature substantially over the past several years and today’s banks and equipment finance companies seem to understand that the role of the asset manager is critical for a successful equipment finance business. I, for one, look forward to seeing the new ways the role of the asset manager will change and grow over the coming years.

Christopher P. Nugent, ASA
Vice President, Asset Management | Key Equipment Finance
Christopher P. Nugent is vice president of asset management at Key Equipment Finance. In this role, he is responsible for asset management for an $8 billion portfolio of leased assets. He has 20 years of experience in leasing and financial services, focusing on residual management, asset remarketing, and portfolio management, including positions with Babcock & Brown, Comdisco, US Leasing, and more. Nugent has equipment management expertise in IT, healthcare, technology, semiconductor, business equipment, construction equipment, and a variety of other industries, and has managed staff and transactions in the US, Europe and Asia.

Nugent is an Accredited Senior Appraiser of the American Society of Appraisers. He holds a BA in statistics from the University of California, Berkeley, and an MBA from Santa Clara University.
Comments From Our Members

Kimberly Esposito
Thank you for shedding light on the evolving focus on technology in the asset management realm. With this piece, you give a clear view.
2.26.2015 @ 10:31 AM
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