Magazine Issues » October 2018

SPONSORED FEATURE: Tech for more efficiency in the investment fund industry

Didier KaylThere’s no excuse for delaying necessary structural changes, writes Fundsquare’s Didier Kayl.

For more efficient fund distribution and improved value-added services, the fund industry must consider how to embrace technology and work in new ways.

With so much effort being devoted to making new regulation fit the way the fund industry works, there are few resources left to enable the industry to unlock new efficiencies. Maybe the Priips KID can be turned into a useful marketing and communication tool. Hopefully MiFID II will reassure investors that they are being sold the correct products, and this will encourage greater commitment. More likely though, it will be funds’ ability to justify the fees they charge, and product accessibility, that will be central to attracting new clients and generating investor loyalty. The fund industry should focus more on cutting the cost of duplicated activities, and opening the way for technology to streamline operations.

Everyone in the funds industry knows that middle and back offices are areas in need of structural reforms, particularly with regard to greater standardisation. For this to happen, the entire supply chain needs to take a fresh look at how systems can be made inter-operable, with streamlined processes, and, where appropriate, data being shared. With this in place, existing technology could be used to its full extent.

An initial start has been made, with industry initiatives such as the European MiFID templates (EMT) and European Priips templates (EPT). They seek to boost reporting consistency by helping to put disparate data into order. For example, by the end of June 2018 some 225,000 EPTs were being collected and disseminated over Fundsquare’s platform. This is boosting inter-operability, and data quality is improving. But still too much of this information remains incompatible, due mainly to the lack of a consistent approach between different jurisdictions.

For example, at the moment, over two-thirds of UCITS mancos have opted for the light version of the EPT, which still leaves substantial room for improvement, plus it can only be used until the end of 2019.

Of course, getting a handle on costs would be a central motivation for this drive. Enabling different players along the supply chain to better inter-operate is the key to maximising automation in cross-border fund distribution. But on top of this, having consistent, reliable databases is also key to preparing data to make it work. Well-organised, reliable databases open the way for streamlined operability.

In addition, there is a need to share information from the point of sale through to the asset manager. This will enable data analytics to highlight the subtly different needs of clients and distributors. Understanding this will help asset managers build a brand that will enable them build long-term relationships with the end investor.

Moreover, it’s not always necessary to build in-house expertise given the emergence of big-data-as-a-service providers. These help players handle data effectively, using off-the-shelf functionality that gives them greater flexibility and control. These new approaches are at the cutting edge of data science, so it would be brave to invest in expensive staff and complex systems. Fund players can wait for the market to provide these services, or they could take the lead. They can work with colleagues to create data-sharing infrastructure to exchange data with every actor across the distribution value chain.

While work goes on to try to make Priips, MiFID II and the rest as useful as possible, the industry can’t use these challenges as an excuse for delaying necessary structural changes. It is vital that everyone in the fund value chain engage with the vital strategic goal of cross-industry efficiency to cut costs and boost relevance.

Didier Kayl is Head of Business & Relationship Development, Client Service Management, Fundsquare

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