6 big fund administration trends that will impact you in 2016
The outsourcing of fund administration is predicted to continue to grow this year. There are increasing incentives for investment managers to use a third party administrator.
FundBPO believes the following trends will be the focus of fund administration in 2016:
1. Cyber security – Protection of data and intellectual property from organised attacks or hackers is a critical component of risk management. The threat has steadily evolved to the point that attacks are in the news practically every day.
This year fund managers and their service providers will be increasingly called on to demonstrate how they mitigate cyber security threats. Investors and regulators want to be confident that adequate controls are in place to protect security, availability, processing integrity, confidentiality and privacy.
2. Customer identification obligations – investment managers need to be able to identify their customers and connected parties to prevent identity theft, financial fraud, money laundering and terrorist financing. Compliance is onerous but necessary and therefore remains a major priority of investment managers around the world.
This year, while FATCA continues its rollout, investment managers will begin to shift their regulatory focus to the Organisation for Economic Co-operation and Developments (OECD’s) Common Reporting Standard (CRS) as jurisdictions begin to enact legislation to begin the exchange of financial account information.
The expense of modifying software and processes to accommodate regulatory change will likely drive more managers to outsource their customer identification obligations this year.
3. Data privacy and protection – another critical issue is keeping on top of the privacy and protection of personal data, given the large amounts of confidential information associated with funds. Most countries now have privacy laws and regulations to protect sensitive data and product and service providers need their own privacy policies that set out how personal information is handled.
The increasing threat of data breaches, regulatory change and technological advancement will make data privacy and protection a key focus for fund operations this year.
4. Continued focus on cost – in the wake of the financial crisis investment managers remain under pressure from institutional investors to manage their costs efficiently.
Increased regulatory requirements and higher fees from service and technology providers will put additional costs pressures on investment managers this year.
Some fund managers that still perform their fund administration in-house may explore third party enterprise solutions for the first time.
5. Product innovation – disruption in financial services by technology is causing investment managers to adapt their product offerings.
As new products like ASX’s mFund Settlement Service, exchange-traded funds and managed accounts continue to gain in popularity, we expect investment managers to increase their use of specialist administration services to support these products.
6. Regional market reforms – the Asian funds management industry is being reshaped by reforms aimed at opening up previously closed markets and facilitating cross-border fund initiatives.
There are growing opportunities for fund flows in Asia, including:
- the opening up of the Chinese market and RMB internationalisation
- Asia Region Funds Passport initiative
- Association of Southeast Asian Nations Collective Investment Scheme
- Hong Kong – Mainland China mutual fund recognition initiatives
To take advantage of these opportunities, fund managers will increasingly look to outsource non-core processes and new market entrants are likely to seek out local fund specialists.
To better understand the changes faced by your investment management business and how you could operate more efficiently in 2016, contact FundBPO.
This article is not intended to be financial advice and is of a general nature only that does not take into account your individual objectives, financial situation or needs. While all efforts have been made to ensure the information contained in this article is accurate, errors may occur.