Asset Owners Take Charge: Navigating The Shift To In-House Investment Management

A recent 2025 peer survey by Northern Trust, Asset Owners in Focus, found that more institutional asset owners now insource certain investment management functions than those who do not. This shift is especially prevalent in public market strategies such as equities, fixed income, and cash. 

The preference to manage these asset classes internally is driven by a desire to reduce costs, improve liquidity access, and gain greater control over portfolio customization. While private markets and hedge fund strategies remain largely outsourced, the trend toward insourcing reflects a strategic shift toward managing systematic investments in-house.

To learn more about the forces driving this trend and the operational impacts insourcing asset owners must consider, read on. 

Why are asset owners insourcing?

Northern Trust’s study shows that asset owners are evenly split between their decision to insource management of equities and fixed income, while deciding more than twice as frequently to insource cash management:

• Equities: mostly insourced 39% vs. mostly outsourced 39%
• Fixed income: mostly insourced 40% vs. mostly outsourced 38%
• Cash: mostly insourced 44% vs. mostly outsourced 21%

Meanwhile, private markets and absolute return assets remain mostly outsourced to third-party managers:

• Private markets: mostly insourced 24% vs. mostly outsourced 55%
• Hedge fund and absolute return assets: mostly insourced 14% vs. mostly outsourced 49%

This split between public market in-house investment and alternative investment outsourcing shows asset owners’ preference for insourcing systematic investment strategies, not discretionary ones. But what exactly is driving that preference? The trend stems from three main themes:

• Liquidity and cash access
  Sixty percent of asset owners said liquidity has become more important in the past year. Of that group, half rely on higher cash reserves to manage liquidity, with the average cash allocation at 11%. As allocations to private markets grow, asset owners need to maintain greater liquidity to meet capital calls on short notice. To meet these needs, equity and fixed income allocations are increasingly being brought in-house or reallocated to cash.
• Control and customization
  Insourcing gives asset owners the opportunity to customize holdings more flexibly. For example, an asset owner may need to request a workaround from an external manager to avoid exposure to sensitive industries like oil and gas, defense, or tobacco. Especially for those with ESG goals, this is a common but complicated request. Having a larger degree of insourced asset management allows CIOs and investment boards to more fully express their views on the market, rather than relying on a patchwork of external managers to reflect their outlook. 
• Cost efficiency
  Many asset owners are more cost-conscious and are keen to minimize third-party fees. When working with an asset manager, they pay not only for intellectual property but also for relationship management services, distribution, infrastructure, and more. According to the study, 56% of asset owners noted that fees were a top-three factor in choosing a new partner. Some would rather take direct control over asset classes they believe they are capable of managing in-house. Operational functions like trading, FX, and technology strategy have become more achievable either internally or through a partner firm, thanks to the decreasing cost of talent and technology.

Operational considerations for insourcing investment management 

While asset owners find important benefits by allocating more investment management responsibility in-house, they also face critical operational challenges that third-party managers previously handled. 

Operational complexity is the biggest single reason an asset owner chooses not to insource. Institutions must now manage trade execution, settlements, FX risk, and build the talent and technology infrastructure to support these functions. As settlement cycles shorten and markets become more volatile, the need for robust systems and skilled teams becomes increasingly critical.

• Trading and settlements
  Bringing public markets investing in-house means inheriting the complex operation of trading. Settlement rules continue to tighten, with North America newly settled into T+1 and EMEA and APAC also eyeing this switch. Significant operational risk lies in trade settlement errors, which can lead to regulatory consequences, strained relationships with counterparties, and reputational damage.
• Foreign exchange (FX) management
  FX responsibilities are another labor-intensive operation that comes with an insourced global trading operation. FX hedging is crucial, especially amid today’s volatile global currency market. Spot hedging, in particular, must be mastered in a timely manner. Delays can lead to squandered returns post-trade, as currency valuations shift frequently.
• Talent and technology
  Although talent and tech costs have decreased, scaling up a people and technology strategy remains challenging. Many asset owners are located in regions without a concentration of asset management talent, making it difficult to attract the required skill level. Northern Trust’s study found that 64% of asset owners named hiring and retaining the right talent as a top-three internal challenge. On the technology front, many need to scale infrastructure to unify trading, portfolio analytics, risk management, compliance, and reporting systems. Bringing a technology strategy up to speed can be a years-long process. Asset owners can ease this challenge by engaging with a partner firm that provides turnkey services. In fact, 50% of surveyed asset owners named technology product implementation and target operating model design as the top challenge where a service provider can assist.
• Resiliency and business continuity planning (BCP)
  Ensuring portfolio management resiliency during environmental or system impacts is critical to maintaining operational continuity and oversight. Resiliency goes beyond basic business continuity—it requires a robust framework of redundant systems, diversified data sources, and geographically distributed teams or backup locations to serve as an insurance policy. These redundancies help safeguard against environmental disruptions, cyber threats, and system failures that could impair decision-making or execution. Partnering with a specialized service provider can further strengthen this framework by offering scalable infrastructure, advanced technology platforms, and access to expert operational support.

Northern Trust as a partner to insourcing asset owners

Asset owners faced with these operational challenges have solutions available. Supporting more than 100 firms—including a growing number of asset owners—with their trading, execution, and settlement needs, Northern Trust is a leading partner for solving operational needs when insourcing.

With a focus on partnership and innovation, Northern Trust offers tailored solutions that help asset owners insource investment management while maintaining operational efficiency, transparency, and control. Northern Trust Banking & Markets solutions, including Integrated Trading Solutions (ITS) and FX Solutions, are backed by advanced technology and global expertise, enabling asset owners to focus on portfolio management and scale their capabilities without building everything in-house.

• Integrated Trading Solutions (ITS): A leading front-to-back trading platform that connects execution with post-trade processes, reducing operational risk. ITS offers access to over 500 brokers and 200 liquidity pools, built-in transaction cost analysis (TCA), and 24/6 global trading coverage. The platform ensures confidentiality and seamless integration with custody services.
• Foreign Exchange (FX) Solutions: Powered by the CompleteFX platform, Northern Trust’s FX services offer algorithmic trading, automated currency management, and flexible execution options. With global trading hubs and detailed reporting tools, the offering supports efficient, transparent FX execution tailored to asset owners’ needs.

Insourced investment management is a fast-growing trend. The benefits and cost savings are clear, but as asset owners take on more investment management responsibilities, they face growing operational demands. Successfully insourcing requires not only a clear strategy but also the infrastructure to support trading, FX, and data integration. Institutions must invest in scalable technology and attract specialized talent to manage these functions effectively. 

While the shift offers greater control and potential cost savings, it also requires thoughtful planning and execution. By addressing these challenges head-on, asset owners can build resilient, agile investment operations that align more closely with their long-term goals and values.