Top executives at some of the fund admin firms surveyed tell Funds Europe about the coming challenges for the year.
Geoffrey Cook, Partner, Brown Brothers Harriman
The challenges for asset managers in 2011 will continue to be balancing continued growth and sophistication of products and their distribution models, while creating a clearer road map with which to simultaneously navigate Ucits IV, Ucits V and the Aifm directive. An increased focus, with respect decisions relating to the location and use of management company passporting and a review of the application of product bifurcation between Ucits and non-Ucits, will become critical. Brown Brothers Harriman will both continue to build out and support global distribution functionality, while engaging with our clients on the implication of changes to the regulatory landscape.
Philippe Ricard, head of asset and fund services, BNP Paribas Securities services
We are prepared for a surge in demand for Kiid production services when Ucits IV arrives. As asset managers fine-tune their operating and distribution models, we expect more fund mergers and the creation of cross-border master-feeder funds.
Polarisation between alpha and beta strategies will see continuing growth in ETFs [exchange-traded funds] and alternatives, requiring robust, industrial servicing capability and significant agility and innovation respectively.
The regulatory pipeline continues to be a concern for our clients and we will leverage our Europe-wide footprint to work on Aifm, Ucits V, Fatca [Foreign Account Tax Compliance Act] and numerous local initiatives to provide the best possible support through these changes.
Tim Keaney, CEO, BNY Mellon Asset servicing
Lower volatility is expected to persist and volume growth will be directly tied to growth in cross-border assets. Risk, transparency and cost concerns will continue to drive demand for new
solutions that are flexible and scaleable. In that respect, 2011 mirrors 2010 – and, indeed, 2009.
That said, I believe we have reached another of the periodic inflection points that have manifested themselves through the 30-year evolution of our industry. We are constantly adapting in line with emerging needs and changing market dynamics, but every 10 years or so a more fundamental reboot of our business models is required. I believe we are on the cusp of another transformative moment, one that requires us to move decisively into new areas of activity and influence. So 2011’s challenge is to be properly prepared to embrace those changes in order to prosper in the new reality that lies ahead.
Pierre Cimino, member of the executive committee, Caceis
One challenge facing Caceis in 2011 is ensuring a smooth transition to the Ucits IV regime when it comes on in July 2011. Ucits IV has required much preparatory work but we are ready to help our
clients take advantage of the directive’s freedoms. Significant resources will be mobilised to get clients’ products in line with Ucits IV requirements.
Another challenge is convincing the asset management industry of the benefits of outsourcing other non-core aspects of their business. For example, our enhanced middle-office outsourcing offer provides many benefits at reduced cost. Services aiming higher up the clients’ value chain are a major focus for Caceis.
Catherine Brady, head of fund services Emea, Citi
As asset managers continue to seek to reduce cost and prepare for regulatory change, we believe the pace of outsourcing and provider consolidation will continue.
As such, fund administrators will need to be able to successfully on-board significant new business opportunities while maintaining or improving service levels to their existing client base. This is combined with the generic increase in expectations asset managers have of their fund administrators, as they increasingly see them more as professional service firms rather than straightforward service providers. As such clients expect fund administrators to not just deliver continuously improving service levels, but also to “deliver their firm” in terms of value-added services, innovation, and thought leadership. Equally, as the trend of alternative and traditional asset management convergence continues, fund administrators will need to be able to manage greater complexity and integrate their often separate long-only and alternative servicing platforms and teams.
Paul Stillabower, global head of business development, HSBC Securities services
The key challenges for 2011 are: economic concerns and oversight standards.
The economic concerns across the Euro-zone will drive the continued shift in the global economy from developed economies to fast growing emerging markets. The ability for securities services providers to capture fund flows between Europe and the rest of the world will be critical.
Regulatory change is driving increased standards of oversight being demanded of securities services providers. This will lead to increased cost of oversight in the value chain. The ability of securities services providers to assess and manage counterparty risk will be key.
HSBC and HSS are well positioned to deal with the challenges highlighted above due to our strong global footprint, robust balance sheet and conservative and transparent approach to risk management.
Justin Partington, Commercial Director, Ipes
Fundraising cycles are likely to remain elongated due to four times more investor money sought than is available. The economic and political climate around the globe will also continue to impact activity levels.
There will be ongoing challenges relating to regulation – the outcome of Aifm Level 2 discussions and the implementation of the Dodd-Frank Act are of note.
Keeping pace with changing reporting and transparency requirements being issued by Institutional Limited Partners Association will also be a challenge. We also have the face the development of technology to meet new reporting requirements and inclusion of more qualitative data.
The increasingly competitive market for fund administration mandates combined with increasing competition between fund domiciles is another issue we have to tackle.
Marcel Guibout, Emea mutual fund administration product head, JP Morgan WSS
We continue to focus on supporting our clients’ ever evolving needs in global distribution strategy and expansion of their fund product range. Implementation of Ucits IV is likely to see activity around the Kiid where we are fully engaged. Areas of effort include providing a strategic service to address our clients’ immediate challenges in the early years of adoption. We will continue to invest significantly in the wider fund administration business to enhance our products and wider capabilities whilst investing in technology to improve efficiency and reduce risk. We must continue to keep pace with the evolving client complexity and challenges paralleled by regulatory challenges, and ensure we capitalise on the opportunities to provide a result, both for our clients and for us.
Toby Glaysher, head of GFS for Ireland, Luxembourg and the UK, Northern trust
We see increasing opportunities as a result of the continuing complexity in the marketplace. Many institutional asset managers and owners are unable to support this increasing complexity through in-house operations staff and technology investments. Consequently they are now looking to outsource. Northern Trust has experience in supporting institutional investors and fund managers outsourcing their middle and back office operations, but our challenge is to ensure that we continue to innovate and create solutions to support these clients’ increasingly complex requirements, such as the ability to provide immediate information on exposures and values of portfolios anytime, anywhere.
Rob Wright, global head, product and client segments, RBC Dexia Investor services
The implementation of Ucits IV will bring significant change and challenges to the fund management industry and this heightened regulation – particularly in areas such as risk monitoring and compliance – may help protect and maintain the reputation of Ucits funds and increase their market attractiveness, particularly alternative investment managers looking to further develop fund products that are Ucits-compliant. Markets should continue to see improvement, and while optimism can be contagious, asset managers will continue to seek strong and reputable business partners with a conservative risk profile, a focus on risk management and a commitment to providing the transparency they demand.
André Valente, head, fund services business development, CRM & marketing, UBS GAM
Regulatory changes, like Aifm and Ucits IV, will trigger a greater need for adjusting offering, processes and legal documentation in order to adapt to the new environment.
This provides great opportunities for administrators.
We anticipate an increased demand for “alternative Ucits” and for more complex product types in the regulated environment, in particular real estate and private equity.
A major challenge for administrators will be to respond to these increasing complexities that the new regulations will bring. Further investment in technology will continue to be necessary, and yet margin pressure will remain. Cost management will therefore be vital.