Global investing to drive asset servicers’ revenues

Global assetsAsset servicing firms have seen more demand for their middle and back-office services from sovereign wealth funds in Asia and other large institutions turning more and more towards global investing and alternative asset classes.

Asset servicers expect increased investment in the US from overseas funds, as well as interest in markets such as China, as investors look for diversification, says EY, a business consultancy that surveyed the asset servicing industry.

Just over half the asset servicing firms in the EY survey expect North America to provide their largest revenue growth opportunity in the next five years, and Asia – which is operationally complex and regionally fragmented – the second largest.

Seventy-seven per cent of respondents globally view hedge funds as the leading revenue growth area over the next five years.

More generally, regulation and globalisation are seen as the largest sources of revenue for asset servicers in the years ahead.

Other findings of EY’s New opportunities for asset servicers survey include:

  •  73% of asset servicers see the impact of regulations as the greatest risk facing the asset servicing industry
  •  77% of asset servicers’ clients globally ask for solutions retlated to the Foreign Account Tax Compliance Act
  •  41% ask for solutions related to the Alternative Investment Fund Managers Directive (AIFMD)
  •  94% of asset servicers offer clients regulatory reporting, mainly for AIFMD
  •  81% offer depositary “lite” services to support alternative investors outside the European Union to sell funds in the EU

Keith Caplan, principal, EY wealth & asset management, says: “Seismic shifts in the industry have resulted in greater demand for asset servicers’ offerings.”

The most successful firms, he says, will move from offering individual services toward an integrated service model where global platforms offer scale.

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