April 2012

TRADE TALK: Wanted: depth and breadth of service (part 2)

Senior executives at third-party administrators surveyed tell Funds Europe about competition and challenges in their industry.

Talking_heads_2

Catherine Brady (Citi), Seán Páircéir (Brown Brothers Harriman), Mike Hughes (Deutsche Bank)
David Dibben (RBC Dexia IS), Philip Masterson(SEI Investments), Pascal Berichel (Societe Generale SS)
Joseph Antonellis (State Street Bank and Trust Company)

Citi
Catherine Brady, head of Emea fund services

What are the main characteristics of competition in the TPA business right now?

Consolidation of service providers by traditional asset managers across jurisdictions. Traditional managers looking for alternative investment product capabilities and vice versa.

What are your clients’ most common demands?

Cross border consolidation; increased outsourcing of value added services; asset managers looking to increase margin by capturing new flows; thought leadership on regulatory change; enabling clients to reduce in-house oversight.

In your view, what are the major challenges facing the TPA business in 2012 going forward?

Demand for global platforms and operating models, will mean significant investment in creating scalable and standardised solutions for our clients, across regions, asset classes, and fund types.

In light of increasing regulatory provisions, demand for outsourcing and provider consolidation will intensify, making client integration and maximal service levels crucial to future success.

Brown Brothers Harriman
Seán Páircéir

What are the main characteristics of competition in the TPA business right now?

Players in the TPA business have to be globally based and globally knowledgeable to compete in today’s financial marketplace.

In this fast paced, challenging environment, it is a necessity to be continually innovative and technology-focused.

What are your clients’ most common demands?

Our clients are increasingly looking for us to help them streamline their operations, improve efficiencies, and reduce costs. At the same time, they are asking for help to grow their business, enter new markets to distribute their funds and guidance on navigating, and responding to, an increasingly complex regulatory and tax environment.

In your view, what are the major challenges facing the TPA business in 2012 going forward?

Persistent market uncertainty with mixed global economic data, regulatory uncertainty and anaemic political leadership are contributing to global market instability. Service providers today face a continual requirement to enhance their services to help clients develop more sophisticated products, distribute their funds around the world, and navigate regulatory challenges, while reducing their own costs and fees to their clients.

Deutsche Bank Alternative Fund Services
Mike Hughes, managing director, co-head alternative fund services

What are the main characteristics of competition in the TPA business right now?

At the moment, competition in the TPA business is largely based on demonstrating an ability to stay ahead of the curve in terms of technology enhancements, developing products to help clients satisfy regulatory obligations and maintaining a high level of client service.

The business will fundamentally change over the next 18 months or so in Europe to a model where banks will have to provide a broader bundle of services to limit the asset protection regulations that are being imposed.

What are your clients’ most common demands?

Basic back-office services have been commoditised and expectations are ever higher that TPAs will offer increasingly sophisticated and customised reporting and analytic tools.

In your view, what are the major challenges facing the TPA business in 2012 going forward?

One of the main challenges will be the need to stay ahead of the curve in terms of new regulatory obligations for our clients even as some of the regulations are only in draft form.

IPES
Justin Partington, commercial director

What are the main characteristics of competition in the TPA business right now?

In a competitive market, scale and reputation are key.  The increase in formal RFPs /multi-stage selection processes underlines this. Cost is a factor, but rarely the deciding one, with some providers undercutting fees. We find clients will pay a fair price for a quality service with most sensitivity around set-up fees. Also, people and technology – in that order – are critical.

What are your clients’ most common demands?

Live access to systems; assistance and guidance with investor reporting; multi-jurisdictional capabilities with a trend towards onshore/offshore co-domiciliation.

In your view, what are the major challenges facing the TPA business in 2012 going forward?

Regulation – preparation for and consequences of incoming regulation, particularly Fatca and AIFMD.

Ongoing challenges in the fundraising environment will continue to mean fewer funds and longer fundraising cycles, increasing competition in the market.

RBC Dexia Investor Services
David Dibben, head, global fund products

What are the main characteristics of competition in the TPA business right now?

The TPA business continues to be highly competitive with providers offering a variety of efficient basic models combined with distinctive value-added services. The number of players appears to have stabilised, and many firms are now concentrating on establishing unique elements to their service, which will make them more attractive in particular niches.

What are your clients’ most common demands?

Regulation is a huge issue for clients and providers, as we continue to evaluate the impact of new legislation and introduce leading edge solutions. We have also seen an increased emphasis on partnership, with clients keen to be involved in the development of new products, particularly with respect to Kiid, Fatca and AIFMD.

In your view, what are the major challenges facing the TPA business in 2012 going forward?

Managing costs will continue to be at the forefront of the TPA’s mind in 2012. Each new regulation requires an extensive amount of research and development, which in turn creates costs that are hard to pass on to clients. We also expect to continue to see a flight to proven products, such as Ucits funds, and a search for efficiency, with products such as ETFs doing well in a cost-sensitive market.

SEI Investments – Global Fund Services
Philip Masterson, senior vice president

What are the main characteristics of competition in the TPA business right now?

The need for focus characterises the TPA competitive landscape. In order to help managers satisfy increasing investor expectations in the era of the investor and fulfil heightened regulatory requirements, TPAs need to focus their investments.

What are your clients’ most common demands?

High quality – from data processing and delivery, to client service and  investor reporting – is always top of mind.  Our clients are seeking insightful data and information from which to make internal business decisions and also to provide their investors and prospects.

Societe Generale Securities Services
Pascal Berichel, head of fund distribution services & supervision of overall fund services

What are the main characteristics of competition in the TPA business right now?

Fund administrators need to cover the entire value chain of asset managers, from fund administration to middle-office, while also offering value-added services, such as independent pricing and performance and risk attribution, as well as to be able to offer all services in
all locations.

What are your clients’ most common demands?

Due to the current regulatory environment, with directives such as Ucits IV, our clients need a fund administrator that can offer identical services in different locations, and consequently, we have deployed our IT platform in all our jurisdictions.
Furthermore, our clients are also increasingly demanding a service offering that covers the entire value chain of asset managers.

In your view, what are the major challenges facing the TPA business in 2012 going forward?

The major challenges facing the TPA business in 2012 are to be able to proactively adapt to various regulatory changes, including the Ucits IV, AIFMD, and Fatca, and to accompany our clients in their current different locations, as well as in their future geographical expansion.

Swedbank AB
Aet Rätsepp, head of fund services, Swedbank

What are the main characteristics of competition in the TPA business right now?

There is a big interest in outsourcing due to lower revenue bases and higher regulatory burden. The main characteristics of competition are price, local expertise and
client management.

What are your clients’ most common demands?

Clients expect to have an independent party checking different types of limits.  Late Nav calculation (it is common in Sweden that Nav is calculated with evening snapshots) and being responsible for full compliance in regulatory reporting.

In your view, what are the major challenges facing the TPA business in 2012 going forward?

The biggest challenge for Swedbank Fund Services will be automation. Fund administration and transfer agency flows must be automated in order to keep operational risks low and be able to serve bigger volumes. Fund management companies are looking after more complicated instruments in order to be able to retain expected profitability to the investors so administration will come more complicated as well.

State Street Bank and Trust Company
Joseph Antonellis, vice chairman

What are the main characteristics of competition in the TPA business right now?

Clients are looking for integrated solutions that address their urgent priorities.

What are your clients’ most common demands?

Clients look to us to help them negotiate the complex regulatory issues — and associated reporting requirements — resulting from an increased focus on risk. They also require increased service innovation, transparency and risk analytics.

In your view, what are the major challenges facing the TPA business in 2012 going forward?

The need to focus on core investment competencies is driving asset managers to consider further outsourcing to third parties. Increasingly, this discussion extends beyond the middle and back office to incorporate areas such as collateral management and decision-making support.

©2012 funds europe