September 2014

SIBOS PREVIEW: Welcome to New England

BostonThe annual Swift conference takes place in Boston from September 29 to October 2. Funds Europe found collateral management, T2S and fund management outsourcing will be the hot topics.

PHILIP BROWN
Executive board member, head of global client relations, Clearstream

What will be the main topics of discussion at Sibos?
Collateral management will certainly continue to be a major topic. The other topic is Target 2 Securities [T2S]; given that the planned launch of the European Central Bank platform is in 2015. This year we will increasingly talk about how to leverage collateral management in a T2S environment. Know-your-customer and compliance will be another big topic.

Has the growing demand for collateral led to new business models for collateral management?
An increasing number of entrants want to be in the “collateral game” and the traditional players, such as market infrastructures and banks, are ramping up their collateral management capacity. They have a major advantage that they sit on very large liquidity pools and have established technology. The development here is an increasing focus on cash-rich corporates, as liquidity providers. 

MIKE HUGHES
Global head of fund services, Global Transaction Banking, Deutsche Bank

Are there any positives that can be taken from the mountain of new regulation facing the industry?
Regulations, like the Alternative Investment Fund Managers Directive [AIFMD], increase investor confidence through the reduction of systemic risk, enhance investor protection, and offer broader distribution and accessibility for investors. Oversight duties, such as investment restriction compliance provided by a fund administrator under AIFMD, also add value to both investors and fund managers. The fund administrator is a key data aggregator for the industry.

In an increasingly automated and standardised world, is it still possible for providers to differentiate themselves through customer service?
Automation and standardisation have certainly helped to reduce costs for fund managers; however, both dynamic technology and subject matter expertise in the customer service space continues to play a key role when managers select an administrator. 

BRUNO PRIGENT
Global head of Societe Generale Securities Services

Are there any positives that can be taken from the mountain of new regulation facing the industry?
Regulations, such as Ucits IV with the key investor information document, or the upcoming packaged retail investment products measures, enable investors to compare different investment products more easily. International asset managers are able to access multiple EU markets thanks to management company passports, while some post-trade operations have been harmonised enabling better cross-border service provision. The Legal Entity Identifier (LEI) initiative will also simplify data management for service providers with clients in different countries.

Is operational outsourcing finally maturing and is it becoming easier to measure its effectiveness?
New regulations require more transparency and additional reporting for regulators thus fuelling this outsourcing trend. Measuring outsourcing performance remains a challenge. Lower, variable costs are clear gains that outmatch any loss of flexibility. Quality control and additional cost savings do, however, require establishing a specific governance process in order to ensure sound and recurring benefits. 

JACK KLINCK
Executive vice president of State Street Corporation

What major themes will be discussed at the event (and the investment management forum in particular)?
We’ll dive in to the pivotal trends influencing the future of the financial industry, discuss higher performance through operational outsourcing and peer into the looking glass and ask what the future might bring and how best to prepare for it.

Does the investment management industry lack innovation?
No, but they lack the necessary insights to marry imagination and information. The volume, velocity and variety of data has exploded and, more than ever before, if you can’t use your data to solve a problem – it’s just noise. To harness the true value of a coherent data strategy, the investment management industry needs partners who can help capture innovation and convert ideas into action.

PAUL CLAPIS
Director of product management, SunGard’s IntelliMatch

What will be the big themes at this year’s Sibos?
Managed services, data intelligence and liquidity monitoring. The driver towards managed services is primarily cost reduction of operations, but a key secondary driver is improved quality.  Everyone is talking about understanding big data yet the industry hasn’t completely figured it out. I anticipate significant breakthroughs in predictive analytics and data intelligence in the next few years. And intraday liquidity monitoring should really take off in the next year.

In an increasingly automated and standardised world, is it still possible for providers to differentiate themselves through customer service?
Absolutely – in fact, the increase in automation means that customer service is one of the few remaining ways that providers will be able to differentiate themselves. The focus will be on the ability to rapidly aggregate all customer information and condense it into meaningful analysis, and to monitor the information in real-time and provide proactive warnings rather than waiting for failures to occur.

KURT WOETZEL
President the BNY Mellon Markets Group

Is operational outsourcing finally maturing and is it becoming easier to measure its effectiveness?
Clients will measure effectiveness in a number of ways. For some, it is the new business they would not have generated without the relationship; for others, it is the ability to launch new products significantly faster. Clients also look to the cost efficiencies derived from using our services and converting to a more predictable, business volume-based fees model. Capital efficiencies resulting from outsourcing are another key metric.

Has the growing demand for collateral led to new business models for collateral management?
Emerging collateral management business models are focused on providing clients with a holistic view of their assets across locations, asset classes and trading venues with an emphasis on driving performance improvements and better liquidity. We also see securities lending leveraged to access higher grade collateral and support liquidity toward the convergence of collateral management with efficient liquidity management.

JOANNA MEAGER
Global head of client operations, RBC Investor & Treasury Services 

Are there any positives that can be taken from the mountain of new regulation facing the industry?
For custodians, regulations present opportunities not only to assist clients in understanding the impact of these regulations, but to ensure that new solutions are built to manage this complexity and help clients better protect and allocate their resources within the new regulatory framework. Providers can work with asset managers to help identify new opportunities. 

Is operational outsourcing finally maturing and is it becoming easier to measure its effectiveness?
Asset managers’ operational outsourcing requirements are becoming increasingly sophisticated. It is no longer purely a question of delegating middle and back office functions to cut costs; rather, it is about using an external service provider that has the required expertise and technological capabilities to help manage the regulatory and operating environment. Therefore, the effectiveness of operational outsourcing can now be measured on a much broader range of metrics beyond simply cost savings.

FLORENCE BONNEVAY
Head of market and financing services, BNP Paribas Securities Services

Has the growing demand for collateral led to new business models for collateral management?
In light of regulatory change, we expect a significant surge in collateral requirements, an increase in the encumbrance of high quality assets, and tightened timelines on collateral processes, implying further automation. We also certainly anticipate that there will be a greater focus on the capacity to allocate eligible assets efficiently and improve the velocity of collateral.

In an increasingly automated and standardised world, is it still possible for providers to differentiate themselves through customer service?
Yes. The challenging landscape has emphasised the need to combine performance with expertise and thought leadership as part of top-tier customer service. Clients are looking for providers who can understand and integrate the changes proactively and in good time, while delivering solutions to fit the specific – and quite different – needs of the sell-side and the buy-side communities. 

YVES POULLET
CEO, Euroclear Bank

Has the growing demand for collateral led to new business models for collateral management?
The collateral challenge relates more to the fragmentation of collateral pools rather than the scarcity. Business models have been adapted to develop new ways of unlocking securities inventories held across geographic locations, in real time. Other sources of liquidity are also being tapped, with corporate treasurers being enticed by the attractive returns, low risk, and low operational burden of triparty repo.

What will be the main topics of discussion at this year’s event?
T2S and collateral management.  The real unanswered questions relate to the challenges and opportunities that the market will be faced with once T2S is live; who will be best placed to take advantage of the situation and who will find the new environment difficult. Technology and the balance between innovation and risk control will also be likely to take a front seat. 

Olivier Connan
Global market manager - asset servicing & investment management, SWIFT

Why has the investment management forum returned to Sibos?
It is a reflection of the pivotal role played by investment managers and the strategic importance of this key segment of users for Swift. This one-day event will bring together investment managers, their counterparties, vendors and market infrastructures to focus on the challenges and opportunities faced by the community. The forum will be a venue in which investment managers can network with peers, meet with their custodians and brokers and find out from leading industry vendors about new developments in the world of technology.

Does the investment management industry lack innovation?
The vast question of innovation will also be tackled during our event. A panel of top industry experts and innovators will look at the capabilities required to create and sustain innovation. What are the best practice and tools available to support this? Is there innovation in the investment management industry, and where is it taking place? Is innovation driven by investment managers, or does it take place on the edge of the industry by potential disrupters? 

©2014 funds europe