April 2015

FUND ADMINISTRATION EXECUTIVE Q&A: Operational centres

Leaders in the field of asset management answer questions regarding their strategies and predictions.

MICHAEL SANDERS, MANAGING DIRECTOR, CHAIRMAN OF THE BOARD, ALCEDA FUND MANAGEMENT

What was a notable aspect of your business development in the past year?
The introduction of a range of regulatory measures has resulted in cost increases. To protect investors in terms of keeping fees – total expense ratios (TERs) – low has required a rethink in corporate strategy. Following an extensive review of our market positioning we have decided to align our business model towards a stronger co-operation with strategic partners. Consequently, we will focus on providing our suite of services to a selected range of sizeable funds. To reach a reasonable TER, it does not make sense to run funds with a size below €100 million.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
Current regulatory requirements are accompanied by an increase in costs. For Alceda, it is therefore a natural and appropriate step to focus on providing our services to strategic partners going forward, those whose funds have reached a volume that enables an efficient co-operation.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
One of the greatest challenges in our business is one of its greatest strengths: regulatory change. Changes are definitely ongoing and we are well-equipped to adapt to them at a corporate level. Our client base is diverse and their priorities therefore differ. Nevertheless, they are equally well-equipped to keep pace.

DARON PEARCE, GLOBAL HEAD, INVESTMENT MANAGERS SEGMENT, BNY MELLON

What was a notable aspect of your business development in the past year?
Our priority remains to support our clients in navigating ongoing regulatory and market reform, technology-related change and other forces of disruption that are reshaping the investment management landscape. In 2014, these efforts most notably encompassed AIFMD and Annex IV compliance. 

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
Our industry is still working through a cascade of consequences triggered by the financial crisis. It is important for us to continue to demonstrate that we are transforming our own business as we look to help our clients transform theirs. Accordingly, we are focused on strategies to deliver repeatable solutions that support our clients across the investment life-cycle in what remains – for everyone – a cost-constrained and ever more complex business environment. We recognise the need to continue to refine and re-engineer the existing investment services model to further enhance value, efficiency and risk mitigation. 

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
In a recent survey of our clients, 71% said they thought they would be spending more on regulatory change in 2015 than in 2014. The current focus areas for most clients are Ucits V, Fatca – both the US and global versions – and derivatives. For some, issues such as Volcker, money market fund regulation, Solvency II and negative interest rates are also a challenge. MiFID II is becoming more widely discussed and overall we monitor some 26 regulations that may impact our clients.

As they move into 2015, managers’ priorities will be to: establish or deepen partnerships with external providers who can assist them in securing access to new markets and clients; data management; leverage opportunities around liquid alternatives (notably smart data); manage technology transformation and regulatory change; identify and
retain top talent.

MIKE HUGHES, GLOBAL HEAD OF FUND SERVICES, DEUTSCHE BANK FUND SERVICES

What was a notable aspect of your business development in the past year?
Over the past year, we overhauled our operating platform and extended our services beyond traditional fund administration and record-keeping. We support complex illiquid assets, hybrids, customised regulatory reporting, and depositary and compliance services. We perform front to middle-office functions for diverse fund and hybrid strategies across jurisdictions. Our capital investment has made us extremely scalable, flexible and enabled us to adapt to the complexity of the environment. We have the healthiest profitability rates of all bank-owned fund administrators measured on a pure fee basis.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
The cost pressure of dealing with the complexity of a converging funds industry as well as responding to rapid regulatory changes. Governance, surveillance and regulatory reporting are the order of the day. Striking the right balance will continue to be a challenge.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?

Larger, sophisticated clients are better prepared for compliance and regulatory reporting demands. Having the right infrastructure for their investor and fund reporting is where the focus should lie. 

PIERRE CIMINO, MANAGING DIRECTOR, CACEIS BANK, LUXEMBOURG

What was a notable aspect of your business development in the past year?
Our execution-to-custody clearing remains a compelling offer for 2015. Services to private equity and real estate have been enhanced beyond standard custody, depositary and fund administration, helping win many mandates. We also opened an office in Italy from where we offer a full package of services to clients in the Italian market.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
Regulation, fee pressure and low interest rates remain the major challenges for 2015. Not only must resources be dedicated to implementing new regulations, but the regulations – along with low interest rates – can also impact certain business line profitability.

Fee pressure is driven both by clients, and by Europe’s very competitive asset servicing environment. Only further consolidation within the asset management and asset servicing industries can enable economies of scale, reduce operational costs and improve revenues.  

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
We have closely followed Fatca regulations and developments to ensure our services and our clients’ businesses are in full compliance with its three main provisions. We take deadlines for all such regulatory measures extremely seriously but sometimes it has been a challenge to convince clients to act in time, and commit to (or not) engaging our services.

ROBERT BRIMEYER, GROUP HEAD, FUND SERVICES, ALTER DOMUS

What was a notable aspect of your business development in the past year?
We have opened new offices in France and Germany. In January 2014, we were the first licensed professional depositary in Luxembourg and have since been granted a depositary licence in the UK. Overall, we have seen some very high-profile wins in 2014 in Luxembourg, France and Jersey, which has increased our AuA by over €21 billion. We recently launched our new regulatory and compliance services in response to the growing needs of our clients in managing the growing complexity in legislation and compliance requirements from international regulators. 

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
The AIFMD is now on track and has brought new business opportunities to the EU and Luxembourg. Our vertical integrated model has been successful and has brought significant growth. The challenge is to manage that growth. Regulatory pressures on our clients lead us to design new services to support our clients in being compliant. An increasing number of GPs are prepared to outsource part of their middle office and there is a whole range of new services, systems and processes to be set up.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
The AIFMD has now been implemented and most EU managers are complying with the directive. The main challenge that they now face is how to deliver AIFMD Annexe IV reporting efficiently, to comply with European distributions rules and face additional reporting requirements that are being imposed on the big investors (eg, Solvency II). 

PERVAIZ PANJWANI, HEAD OF EMEA, GLOBAL FUND SERVICES, CITI

What was a notable aspect of your business development in the past year?
There was a continued enhancement of solutions to aid clients’ regulatory compliance. We launched an AIFMD-compliant depo, valuation and reporting solution, and Ireland MMIF reporting capabilities. Emir II, Ucits V, etc, solutions are to be incrementally launched.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
Geopolitical forces could impact markets and asset management results. The cost of regulation could cause certain products to be unsustainable. Regulatory provisions that are anti-competitive could shift flows outside of Europe.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
Managers are interested in the development of the iCAV, which will change the distribution and reporting requirements of Irish funds for US tax purposes.

Managers will need to consider the Ucits VI directive, which will have significant focus on eligible assets and use of derivatives. 

A consultation paper issued by Central Bank of Ireland (CP86) will alter some aspects of management of funds, and in particular some of the designated management functions which will align Ucits closer to alternative investment funds (AIFs).

CARL ANDREWS, HEAD OF HSBC SECURITIES SERVICES, SCOTLAND

What was a notable aspect of your business development in the past year?
During 2014, we continued to invest heavily – in terms of technology, people and process – into new products and in working with the external market. We also launched our TTF [tax-transparent fund] product.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
2014 was hugely successful for HSBC in terms of obtaining new client mandates and growing across our broad client base, leveraging the investment in our platform and people.

The welcome challenge now is to continue to grow our business at a consistent rate, whilst supporting the increasingly changing external environment and launching new products.

We are well positioned with the investment made in development and implementation of our capabilities. 

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
Managers have enhanced regulatory reporting requirements and most managers must establish and invest in new depositary oversight arrangements under AIFMD. HSBC’s approach is to invest heavily in regulatory project programmes and the output of a committed and structured project approach is demonstrated by product support to our clients across AIFMD, DFA and CFTC directives, along with a fully integrated live Fatca offering.

Our product capabilities complement the strong fundamental qualities of HSBC as a strongly capitalised bank, which helps managers differentiate HSBC from our competitors who may not have expertise to carry out depositary functions nor capital strength to support such regulatory change.

MARCEL GUIBOUT, HEAD OF FUND SERVICES CORE STRATEGY, JP MORGAN

What was a notable aspect of your business development in the past year?
We continued to invest across our business to help our clients distribute or manage products more effectively, meet regulatory changes or gain efficiencies. This can have multiple benefits, as our focus in areas such as master-feeder and tax transparent funds helps our clients efficiently reach investor needs, at the same time allowing us to leverage developments to the benefit of our growing asset manager and insurance client base.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
First and foremost, we continue to be faced with a changing regulatory environment. While this may be considered a headwind, it is also an opportunity to offer solutions that can benefit our client base. The growth of low-cost products places focus on efficiency and product innovation to be competitive, and we are working to ensure our clients can rely on us to support them in all these areas.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
With many of our clients having experience with AIFMD, they are much better prepared for Ucits V. However, we are urging clients to ensure that their depositary arrangements in terms of legal documentation, data provision and reporting are prepared for in good time to meet the deadlines. In addition, fund managers should ensure that their depositary can support all of the markets their funds invest in.

ROB SHORT, AGING PARTNER, LANGHAM HALL

What was a notable aspect of your business development in the past year?
Langham Hall opened its Luxembourg office in 2014 and in May we became regulated by CSSF. We have since added a dozen new clients to this jurisdiction. 

During the last 12 months, Langham Hall has been committed to quality. We have been awarded ISAE 3402 Type II assurance report. Type II is the second phase of the International Standards on Assurance Engagements. 

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
Demand for new structures; 2015 continues to be a growth year for the alternative investment funds with higher numbers of funds and variety of structures being set up. The challenge for our business is not to grow too quickly that we compromise quality. As a professional service business, the quality of our service has to be at the top of its game and remain sustainable.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
Regulation is a hot topic, Fatca and UK FATC will continue to be a priority for global managers alike, alongside AIFMD and with the varying regulatory reporting requirements for each EU member state.

KAVITHA RAMACHANDRAN, SENIOR MANAGER, BUSINESS DEVELOPMENT AND CLIENT MANAGEMENT, MAITLAND GROUP

What was a notable aspect of your business development in the past year?
Our new product and service offerings around AIFMD, Fatca and Emir have been well received by both existing and potential clients. We have established a Luxembourg-based AIFMD-compliant fund platform and third-party AIFM services and we are focusing our business development efforts in this space. We currently have strong European expansion plans and the group has expanded its sales teams to focus in these geographies with product specialists in Europe. It is becoming increasingly clear that scale and a multi-dimensional service offering will be crucial to growing any fund administration business in the future.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
A key challenge is to be able to harness and orchestrate the vast amounts of data on our platform in order to provide added value to our clients and assist in the distribution, client reporting and regulatory demands. This is translating into the requirement for attracting and retaining expensive human capital. Clients are increasingly appreciating the costs associated with this and now need to appreciate the resultant upward pressure on fees.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
Overall, the response from our clients has been good and they have adapted to change. Reviewing the regulatory landscape and being prepared would be crucial going forwards and we are playing a key role in creating the awareness and raising the level of preparedness.

TOBY GLAYSHER, HEAD OF GLOBAL FUND SERVICES, EMEA, NORTHERN TRUST

What was a notable aspect of your business development in the past year?
Key examples include developing services to enable our clients to take advantage of the range of opportunities presented by the UK’s tax transparent fund (ACS) – a number of launches go live over the coming months. Our focus continued on developing regulatory solutions – such as assisting clients with the AIFMD’s complex data collection, management and reporting requirements; offering enhanced collateral management and liquidity services; and investing in our depositary expansion across Europe.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
The industry is faced with the common challenge of doing ‘more for the same’ for their clients, having to deal with increasing complexity and regulation - and the ensuing focus on risk management, transparency and governance. All of which requires significant investment in technology, infrastructure and people.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
AIFMD continues to demand significant resources, but our clients are now well prepared for the resulting benefits: compliant funds will enhance investor protection and reduce risk, which may lead to investor preference for such funds. 

In the coming months, I believe the focus of many clients will turn to Ucits V, as well as revisions to the client asset regimes (CASS/CAR). 

Additional considerations include closely monitoring MiFID II, and the potential for insurance investors to look to fund managers for their Solvency II data. 

CLAUDE PECH, GLOBAL HEAD OF BUSINESS DEVELOPMENT AND CLIENT RELATIONSHIP MANAGEMENT, PICTET

What was a notable aspect of your business development in the past year?
Pictet’s one-stop shop solution – including ManCo services, AIFM and white-label funds – has been successful as many other service providers do not provide ManCo or AIFM as a result of their risk policies. With a private banking DNA, Pictet’s ability to provide tailor-made services positions us between large players with a ‘factory’ approach, and smaller players that do not have the necessary critical mass. Despite low margins, there are a growing number of clients wanting to fly first-class in this sector and ready to pay a premium.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
Asset managers consider that fund administration is a commodity. They are totally wrong. Fund administration is becoming more complex as a result of client needs and regulation, and asset managers may realise the hard way when, after electing the cheapest solution, they end up doing part of the work themselves. 

Too much competition between big players has made margins almost insignificant. Some have exited the business. There will be more, I think, while smaller players that lack critical mass will also exit or be taken over. The number of players will reduce but there will be more diversity in the typology to meet client needs.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
AIFM regulation for UCIs has initially been seen as another cumbersome EU regulation, but distribution is now seen as an opportunity to replicate the success of cross-border Ucits. This is something that asset managers are looking at. At the same time, we will see more consolidation of local funds into a master fund in Luxembourg and Ireland.

SEBASTIEN DANLOY, HEAD, CONTINENTAL EUROPE & OFFSHORE, MANAGING DIRECTOR, LUXEMBOURG, RBC INVESTOR & TREASURY SERVICES

What was a notable aspect of your business development in the past year?
RBC I&TS further developed our client coverage model and continued to invest in technology and new and enhanced services, as well as solutions that improve operational efficiency. 

In Europe we have looked to leverage the strength of our leading offshore service offering, while targeting continued growth across all key regions worldwide. We continue to focus on leading in the key offshore markets of Luxembourg and Ireland, along with Canada, and on delivering operational excellence to our clients globally. 

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
In the face of low interest rates and provider consolidation, RBC I&TS’s strategy is to enhance operational efficiencies in line with clients’ business needs. Further, ongoing regulatory change continues at an unprecedented pace. As a specialist provider, RBC I&TS offers clients differentiated solutions and services. With a dedicated team monitoring and assessing relevant legislative change and driving development programmes, we have a continued focus on supporting clients in meeting their regulatory obligations.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
Fund managers are focused on understanding the implications of, and ensuring compliance with, a range of regulatory obligations, such as the Foreign Account Tax Compliance Act (Fatca), the European Market Infrastructure Regulation (Emir), and Ucits V. 

RBC I&TS continues to address regulatory change with client-focused solutions. Where contractual or operational changes are pending, RBC I&TS works in partnership with its clients to ensure the appropriate processes, procedures and documentation requirements are in place in advance of implementation dates. 

Currently, Ucits V is a key priority for both providers and clients.

PHILIP T MASTERSON, SENIOR VICE-PRESIDENT, MANAGING DIRECTOR, SEI INVESTMENTS – GLOBAL FUND SERVICES

What was a notable aspect of your business development in the past year?
Post-AIFMD, we’ve seen significant demand for our regulatory and investor reporting and depositary services. We’ve built three reporting streams. One is for managers, to help them manage their business with customised data sets based upon individual roles in the firm. The second is for limited partners and is a scalable, customisable, 24/7 mobile accessible investor dashboard. Our regulatory reporting platform, the third, was built on a data warehousing backbone, so we’ve been able to evolve to satisfy client demand for Form PF. The same applies to Annex IV reporting.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
It remains a difficult asset-raising environment for start-ups and mid-sized managers, and barriers to entry remain high due to increased regulation and investor expectations. Satisfying demand for data/information remains a challenge. 

Cost-effectively scaling operations is difficult in a landscape defined by escalating competition, globalised distribution and costs outpacing revenue growth. We seek to supply managers with a sophisticated operating platform, advanced data management and deep industry expertise.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
The AIFMD reporting process has now been completed for most of our managers and we supported their Annex IV reporting across seven different member states. While we have assisted with the process of completing this report, managers still need to ensure full compliance with this directive. We have also seen a heightened awareness with cyber-security reviews and expect this area to receive even more focus from regulators. 

PASCAL BÉRICHEL, HEAD OF FUND SERVICES OPERATIONS, SOCIETE GENERALE SECURITIES SERVICES

What was a notable aspect of your business development in the past year?
From a geographical perspective, upgrading the SGSS pan-European fund administration platform for UK customers has attracted the major part of our investments. This encompasses specific enhancements of the fund administration solution to meet the requirements of wealth and investment managers, through a modular suite of services, from wealth to fund services.

On the product side, 2014 was dedicated to regulatory reporting, with a major focus on Annex IV. The R303 reporting service, based on a three-modules approach, is now used by over 50 AIFMs in Europe.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
The regulatory tsunami seems to be mainly behind us, with only some limited upcoming changes: Packaged Retail Investment and Insurance-based Products (Priips) or IORP will, for sure, be challenging, but impact can also be derived from previous regulations, such as Ucits IV and Solvency II. The key point from now on should be to take advantage of what has been done in the regulatory landscape, such as reporting facilities or data leveraging.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
Even more than Emir or Priips, Solvency II should be the 2015 regulatory headache for asset managers that have significant institutional investors in their client base. Insurance companies’ readiness for Solvency II Pillar III requirements is heterogeneous throughout Europe, which could result in some local bottlenecks. 

WILLIAM SLATTERY, EXECUTIVE VICE PRESIDENT AND HEAD OF GLOBAL SERVICES, EMEA, STATE STREET BANK

What was a notable aspect of your business development in the past year?
Our offshore business is a big focus for us. We have a very strong franchise across Ireland and Luxembourg, which are domiciles of choice for global fund managers looking to distribute product ex-North America. Our integrated onshore/offshore capabilities, including transfer agency, represent a key differentiator for us in the market place. We believe there are further opportunities to leverage these capabilities to provide multi-domicile solutions for clients with global growth ambitions.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
Two challenges stand out. The first is the need to stay focused on clients, to ensure we can help them thrive in an evolving competitive and regulatory environment. This means delivering new, innovative solutions, including the data and analytics capabilities of our global exchange business. The other focus is to stay on top of regulatory and compliance requirements and uphold the highest standards of accountability and transparency. For State Street, these two priorities go hand in hand.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
Overall, the challenge is not just to prepare for and implement individual regulatory initiatives, such as AIFMD and Ucits V. It’s also to understand how different initiatives interact and profoundly change the landscape in which firms operate, and to identify what challenges and opportunities result from the likes of MiFID II and MiFIR. 

Longer term, asset managers might also want to ask themselves what they want from the European Commission’s Capital Markets Union initiative.

AET RÄTSEPP, HEAD OF FUNDS SERVICES, SWEDBANK

What was a notable aspect of your business development in the past year?
Swedbank focuses mainly to plain vanilla Ucits and AIFs. We have been investing into existing clients and added services to complete our offering for investment managers. Geographies are Sweden, Finland, Norway, Luxembourg and Baltic countries.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
One of the challenges going forward is Ucits V depositary bank requirements. More information needs to be reviewed and analysed going forward.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
We see that clients would rather outsource as much as possible in order to get rid of the need for preparing for new regulatory challenges. AIFMD reporting is probably keeping fund management companies busy nowadays.

CHRIS ADDENBROOKE, CHIEF EXECUTIVE, CAPITA ASSET SERVICES, FUND SOLUTIONS

What was a notable aspect of your business development in the past year?
Capita has successfully completed its automated Annex IV reporting to both the Financial Conduct Authority and the Central Bank of Ireland, further extending its range of services to Ucits and alternative investment funds. 

Capita is the UK’s leading independent alternative investment fund manager (AIFM) and currently provides services to around 50 funds across the UK and Ireland. The development of the Annex IV report has been a complex process requiring extensive data extraction and analysis. As a result, Capita is able to provide an automated and verified population of 100% of the Annex IV schema, without any dependence on additional information from portfolio managers. 

ANDRÉ VALENTE, HEAD OF UBS FUND SERVICES SWITZERLAND & HEAD UBS FUND MANAGEMENT SWITZERLAND, UBS FUND SERVICES

What was a notable aspect of your business development in the past year?
We have continued to invest in our global business development and client relationship model, covering multi-jurisdiction clientele with traditional and alternative fund servicing requirements. The main focus covers web reporting capabilities, middle and front-office platform (UBS Frontier), and broader geographic coverage of alternative solutions. The acquisition of institutional clients in the traditional area has been extremely successful and bases on the strengthening of our value proposition, particularly in private labelling solutions for asset managers, pension funds and insurance companies.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
The adaptation to new cross-border regulations and requirements with regard to higher transparency and investor protection continue to be a main item on fund managers’ agendas. In addition to regulatory changes, the industry faces increased competitive pressure, falling margins and decreasing appetite for investments in operations and IT infrastructure. This makes various market participants vulnerable and increases the risk of non-compliance in an environment where scrutiny from regulators and expectations from stakeholders is increasing.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
While industry participants are probably well prepared for traditional local institutional business, and have a sufficient level of skills in terms of investment and distribution capabilities, they reach a limit when it comes to the harmonising cross-border rules and distribution requirements. They will either partner with a specialised provider or develop a competitive edge by investing in skills, technology and distribution and create the necessary cross-border competences or adapt their business model to reach new geographic areas.

BILL STONE, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, SS&C GLOBEOP

What was a notable aspect of your business development in the past year?
Demand for regulatory services, including Annex IV and Emir reporting, from both existing clients and non-administration clients, has been significant. Given the challenges faced by many participants at 2014 year-end, we expect this demand to grow. Managers are increasingly required to provide investor-focused vehicles, including managed accounts, funds of one and liquid alternatives structures. This can create challenges around operating scale, and an increase in demand for middle and back-office services. We have seen growth in managed account platforms, including Ucits products, and the emergence of AIFM platforms.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
Given performance in certain strategies in 2014, investors have been considering their approach to the sector. In addition to the ongoing challenges around multiple regulatory demands, performance and costs will still be critical. The withdrawal from, or de-emphasis of the sector by certain service providers, will offer managers the opportunity to identify long-term business partners with modern technology, a broad service range and the ability to support a cost-effective operating structure.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
As with any new reporting requirement, the market faced challenges around Annex IV reporting and this will still be an area of focus where managers have not selected strong service partners. Managers will need to focus on developing oversight capabilities required by AIFMD. An example is strong operational risk controls. 

JEAN DEVAMBEZ, HEAD OF ASSET AND FUND SOLUTIONS, BNP PARIBAS SECURITIES SERVICES

What was a notable aspect of your business development in the past year?
We continued to support fund promotors in the new market environment. This included further extending our depositary services franchises in response to regulatory developments such as AIFMD and Ucits V. 

We also continued to support global funds with structuring, administration and cross-border distribution solutions. In 2014, we most notably provided asset managers with best practice suggestions for their fund distribution strategies in Latin America. We also invested heavily in our data management, analytics and risk offering to facilitate our clients’ decision-making processes and help them enhance transparency and improve reporting.

What are the major challenges facing the third-party fund administration business in 2015 and going forward?
Helping our clients cope with the new regulatory framework is one of our main challenges, as is the development of smart data solutions giving clients a high level of control and precision over data monitoring. We are focusing on developing our offering in this area with next-generation data visualisation tools and risk analytics. Solvency II and the development of environmental, social and governance factors both present our clients with a major data challenge.

In terms of ongoing regulatory challenges for your fund manager client base, in which areas are they better prepared, and which areas do they need to prioritise in the coming months?
Asset managers should be getting ready for Ucits V, which places new responsibilities on depositaries, meaning existing agreements will need to be repapered. 

Preparations for Mifid II are also gathering pace, the major challenges being the inducement ban, the unbundling of research and execution.

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