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INSIGHTS – HEADERS – At Asset Management Cross Roads 1820X375

At asset management crossroads: balancing costs, regulations, and growth

FE fundinfo's Head of Business Development Luxembourg, Jean-François Bequevort dives into the pressing challenges shaping the fund industry today.

Cost pressures and efficiency

In a highly competitive environment with strong pressure on margin, the asset management industry is experiencing a similar cost/income ratio challenge to the one that impacted the banking industry in recent years.

“It's not surprising to see an experienced chief operating officer capitalising on their previous banking experience and joining an asset manager to work on cost/income ratio improvement initiatives. The fund industry faces pressure to enhance operational efficiencies, simplify processes, and reduce the costs allocated to products; conversely, increasing competition forces industry players to be more creative in structuring funds, engaging with clients, and targeting new markets and countries,” said Jean-François Bequevort. 

A superior distributor network management is a recurring theme for most participants. Focusing on optimising and transforming existing operating models is also a key question, as is outsourcing non-core functions.

The regulatory balancing act

Like other industries, such as transport, the asset management industry is also experiencing constant waves of new regulation. Asset managers are faced with ever-increasing fund data volumes and reporting obligations, draining time and resources. As tempting as it may be, not addressing the challenges could result in reduced profitability and missed growth opportunities.

“Cost-effectively navigating regulatory requirements while focusing on increasing assets under management remains a delicate balance for most players. The strategic translation of ongoing regulatory updates into end-customer benefits is paramount,” said Jean-François Bequevort.

ESG is a clear example of where regulatory efforts could contribute to driving more revenues by facilitating individual investment decisions but often fail to do so. “Companies invest a lot to secure compliance but fail to make this data snackable for investors. It remains dry and complex, and instead of helping the end investor make an informed decision, it remains regulatory-centric and simply blurs the general picture,” said Jean-François Bequevort.

Data: the golden key to efficiency

As discussed by key stakeholders during the ALFI Cross-Border Distribution Conference, data management across the fund life cycle remains a central challenge for many players. Building a future-proof, consistent, and reliable golden source of fund data will be the critical enabler for any cost/income initiative, as reliable data is the backbone of any cost-saving initiative in asset management.

“At FE fundinfo, we empower clients to streamline data management through intelligent services like fund data management, regulatory compliance tools, and investor communication solutions. This focus on data aligns with the industry's need to improve efficiency and reduce costs, ultimately allowing clients to make data-driven decisions and improve investment outcomes,” said Jean-François Bequevort.

Centralised data management technology platforms that enable asset managers to "create once, distribute everywhere" will lead to short-term positive differentiation in the market, improving efficiency across the entire value chain from fund manufacture to distribution.

Artificial Intelligence (AI) and Big Data Analytics and ability to draw smart insights are increasingly being used for portfolio analysis, risk management, and investor communication. We need to ensure organisations are supported in any digitalisation process, a recent example of this is helping our clients migrate and onboard to e-file, our proprietary transmission and communication platform, following changes initiated by the CSSF. The platform facilitates data and document submission, thus enabling secure and automated reporting to the Luxembourg authorities.

At FE fundinfo, we understand the complexities dealt by asset managers operating in a cross-border environment, and are currently working with other national competent authorities to expand our offering.

As the asset management industry faces a pivotal time, the big question is how to adapt to these unstoppable forces and rise up from the crowd.

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