The shrinking banking sector presents major opportunities for asset managers, with a major role for them in the global savings debate, a report says.
KPMG says opportunities abound for the global asset management industry as the shrinking of the banking sector has thrust asset management to the heart of global capital flows and the pace of regulatory change is starting to ease off.
But a challenge for the future will be increased scrutiny of shadow banking.
KPMG’s Evolving Investment Management Regulation report highlights that the regulatory uncertainty of the past years has settled down and predicts that 2014 is the year the wheel turns, with the sector now entering the implementation phase of regulation with much greater clarity.
Tom Brown, global head of investment management at KPMG, says: “It is indeed the age of asset management.”
The industry has come through the financial crisis well, he says, and is now operating in a much more stable regulatory environment with greater clarity and certainty.
“The next five to ten years hold enormous potential for asset managers and I expect to see players introduce innovative products and adopt new strategies as the industry plays its role in the broader savings debate.”
He says regulators have followed through on their promise to restrict trading and private funds within banks, which has led to trillions of assets being spun off.
“As talented traders have less access to bank balance sheets, we will increasingly see them migrate toward the asset management continuum, which is another positive for the industry.”
But he adds that more scrutiny of the industry will result from firms being increasingly considered systemically important institutions.
“With so many activities previously housed in banks moving over to asset management it is inconceivable that the industry will not be closely monitored.”
Charles Muller, investment management regulatory partner at KPMG, says that while the industry is operating within a context of greater certainty there are a number of regulatory challenges ahead.
“Shadow banking is viewed as the next big battleground and greater transparency and consumer protection are the key objectives of regulators. There will be increased pressure on data and reporting with both investors and regulators requiring more meaningful communication from businesses.”
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