Seeking to sharpen their competitive edge, many asset management companies are refining their business models. They’re placing greater emphasis on investor-facing functions such as marketing and distribution, while developing products for new investor needs. Yet, all too often, IT struggles to support these initiatives – holding back changes that are critical for future business success.
As Europe’s asset managers prepare for the new over-the-counter (OTC) derivatives regulations, due to be introduced from 1 January 2013, they’re realising that the new regime’s implications go far beyond compliance. By introducing the safety buffer of a central counterparty, the European Market Infrastructure Regulation (EMIR) is driving up costs and might force some boutique managers to look again at their investment propositions.
When asked what was the asset management industry’s greatest unappreciated threat, a senior US hedge fund executive recently told one of our partners that it was cyber criminals hacking into computer systems. Asset managers and their service providers didn’t have sufficient security in place, he said, and this could result in significant financial losses and seriously damage the organisation’s reputation.
When the UK government responds to the Kay Review of UK Equity Markets and Long-Term Decision Making later this autumn, it will focus the minds of asset managers everywhere on fundamental strategic issues. Kay’s central recommendation is that managers should take a longer-term investment approach, learning from the likes of legendary investor Warren Buffett.
In South Africa’s developing asset management industry, new regulations threaten to put a brake on revenue growth, according to local asset managers. While the country’s managers are growing far faster than those in developed markets, a raft of regulatory changes associated largely with local pension fund reforms and enhanced investor protection threaten to stifle the pace of expansion.
In the run up to the introduction of the Alternative Investment Fund Manager Directive (AIFMD) over the next year, Europe’s hedge, private equity and real estate managers will have to start revolutionising their risk management.
At a time when trust is a topic of debate in the financial sector, hedge fund managers have been taking great strides towards improving investor confidence. In doing so, they’ve been moving towards gaining the status of ‘trusted hedge fund advisor’.
When selecting an asset management firm, institutional investors no longer make investment performance the primary factor. In fact, they rank it equally highly with expertise and risk transparency. So if asset managers are to forge long-lasting relationships with their institutional clients, they might need to refine their objectives to give a greater weighting to factors beyond performance.
The breadth of the proposed prohibitions and their complexity has caused industry consternation. After significant concerns were expressed in the comment period that ended on 13 February 2012, US regulators are considering their next steps, and a revised rule or proposal seems likely.
PwC Observation: It has been suggested that the proposed regulations have either delayed FATCA or that the efforts around compliance for the asset management industry have been substantially mitigated. It seems in fact there is still a substantial amount of work to be done by these asset managers to even qualify for deemed-compliant FFI status. Given that the regulations have provided details on how these rules may ultimately work, asset managers should have sufficient direction to begin assessing and developing a plan with their third-party service providers to implement the requirements of FATCA into their business processes and procedures.
In November 2011, the European Securities and Markets Authority (ESMA) published its final advice to the European Commission (EC) on possible implementing measures under the Alternative Investment Fund Managers Directive (AIFMD). The alternative fund industry now has a clearer picture of what AIFMD will mean for it.
In this issue of Asset Management (AM) News we look at how investors' view of value has changed. Performance is still essential but investors are now looking for a competitive fee, strong infrastructure and increased transparency. In this issue, we highlight areas where asset managers can respond to these raised expectations.
In this edition of AM News we build on the themes that emerged from our recent Global CEO Survey and discuss some of the strategic decisions asset managers need to consider as the industry enters a new growth cycle.