April 2017

FUND ADMINISTRATION: The Directory (Part 1)

Third-party administration providers that took part in our survey are listed in our annual directory. Meanwhile, senior executives answer questions about product launches and business trends. (Part 1) ROBERT BRIMEYER, CHIEF OPERATING OFFICER, ALTER DOMUS About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
In 2016 we have onboarded 91 new funds whereof 63 have been new fund launches. Alter Domus continues to consistently focus on servicing private equity/infrastructure funds, real estate funds, debt funds as well as fund of funds. We have seen the biggest growth in debt fund launches in 2016. Which are the top one or two regulations that you are most observing at present from a TPA point of view?
AIFMD and related topics have by now become plain vanilla topics and both Fatca and CRS are also maturing topics. We now put more focus on supporting our clients in complying with new emerging regulatory challenges such as SEC reporting, transparent fee reporting and complying with ever-increasing reporting requirements and deadlines across all jurisdictions. How have market trends in the past year shaped the demands of your clients?
The alternative investments industry has been evolving rapidly over the last couple of years and is moving forward quickly in terms of maturity. We experience that the requests we get from our clients become more and more aligned around regulatory reporting and standardisation of investor reporting. Also, as the industry matures, we see fund managers increasingly outsourcing middle office services to us. An increasing number of managers realise that it will require significant investment into technology if they want to deliver state-of-the-art reporting to their clients. Sharing these investments with peers by moving the services to high-quality service providers such as Alter Domus allows them to focus on their core business and secure the level of control and efficiency in daily service execution.
PETER HUGHES, FOUNDER & CEO, APEX FUND SERVICES About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
Apex helped launch 316 funds throughout 2016. The largest groups of new launches came from hedge funds and private equity funds. Which are the top one or two regulations that you are most observing at present from a TPA point of view?
CRS and Fatca both remain key for fund administrators; although CRS came into play in 2016, the market is only now starting to experience the first round of reporting and there is still a substantial amount of education involved in the process and in explaining the different variations to clients. As we hold due diligence information on investors, as an independent global administrator, we find ourselves excellently positioned to service clients requiring robust tax-reporting solutions that can be developed and adapted for clients and XML reporting schemes. The Fourth EU Money Laundering Directive and associated regulations are also prevalent at the moment; member states in Europe have until June 26, 2017 to transpose the directive into local law and as a result, we are focusing on ensuring our policies and procedures are robust and strictly adhere to these requirements. The key updates in this area relate to a solid risk-based approach; ongoing monitoring, beneficial ownership, customer due diligence (CDD), politically exposed persons (PEPs), and third-party equivalence are all important areas for TPAs to focus on to ensure clients are correctly serviced and protected. How have market trends in the past year shaped the demands of your clients?
Regulation continues to shape the demands of managers across all regions. Ever-increasing compliance costs alongside a constant squeeze on fees means managers will need to further scrutinise their operations and there has subsequently been a push toward outsourcing these processes to keep overheads low and maximise productivity.
JEAN DEVAMBEZ, GLOBAL HEAD OF PRODUCTS AND SOLUTIONS, ASSET FUND SERVICES, BNP PARIBAS SECURITIES SERVICES About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for? As at 31 December 2016, we were administering 10,166 funds. Market growth has been principally driven by traditional asset classes as well as a growing interest in debt funds. Funds promoters and investors are likewise developing an appetite for ETFs, private equity and real estate. Which are the top one or two regulations that you are most observing at present from a TPA point of view?
MiFID II and its transaction-reporting requirements are at the forefront of our clients’ minds. Clients are also looking to us to help them comply with investor protection requirements and ensure products match investors’ risk profile and investment needs. The Money Market Fund Regulation is also on clients’ radar, requiring changes to the way valuations are conducted and liquidity management reporting.
DARON PEARCE, CEO EMEA ASSET SERVICING, BNY MELLON About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
We have been through a period of expansion and now support over 2,000 funds in Europe. The fastest-growing segment has been passive funds, in particular ETFs and alternative funds, where we have seen a marked increase in interest for loan funds and property funds. Globally, nearly 500 new ETFs were launched in 2016. We recently appointed Jeff McCarthy to the new role of CEO for ETFs. Which are the top one or two regulations that you are most observing at present from a TPA point of view?
This year, MiFID II is everyone’s priority and there are few areas in the investment life-cycle which will remain untouched when the directive comes into force. The introduction of variation margin requirements for non-centrally cleared OTC derivatives has also been a focus for many of our clients. How have market trends in the past year shaped the demands of your clients?
Fintechs, digitisation and technology are all high priorities for our clients. The term ‘disruption’ is often used alongside digitisation but new technologies also create opportunities for cost reductions, innovation and new products. Retail investors are using newer forms of distribution such as social media and all investors expect to access real-time data through APIs and apps. BNY Mellon is recognised as an industry leader in this area with NEXEN, our new open-source, cloud-based technology platform.
PHILIPPE BOURGUES, MANAGING DIRECTOR, CACEIS BANK, LUXEMBOURG BRANCH About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
We are definitely seeing the general appetite for ETF-type products reflected in the growing trend for launching passively managed and smart beta products. Furthermore, with the performance potential of both real estate and private equity investments, we have also seen the number of fund launches for these strategies continue to rise steadily in 2017. How have market trends in the past year shaped the demands of your clients?
As an increasing number of institutional players (insurers) invest through asset managers, we are seeing growing demand for detailed transparency reporting relating to Priips, MiFID II and Solvency II. In response to demand, we are also looking into setting up triparty collateral management services for clients taking advantage of our securities lending offer, in order to reduce the risk of our own management of clients’ transactions’ collateral coverage.
PERVAIZ PANJWANI, HEAD OF EMEA CUSTODY & FUND SERVICES, CITI About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
130 fund launches ranging across Sicavs, Ucits and Oeics. Which are the top one or two regulations that you are most observing at present from a TPA point of view?
Key regulatory impacts include (1) Emir, where we have seen a significant increase in collateral funds, and (2) MiFID II, where clients, for example, are looking to us to partner with them as these regulatory changes drive requirements for new FX solutions. Citi continues to develop its investment data capabilities to facilitate demand for our clients’ regulatory data. How have market trends in the past year shaped the demands of your clients?
Market trends for greater portfolio diversification require a broader instrument scope and Citi is continuing to invest in new capabilities to support developments across asset classes. With a particular focus on post-trade OTC capability, we are working with our clients and the industry to drive delivery of new OTC functionality.
DANIEL SIEPMANN, CEO, CREDIT SUISSE FUND SERVICES (LUXEMBOURG) SA About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
During 2016, we have launched 38 funds. Asset classes and strategies ranged from plain vanilla funds, (senior) loans, fixed maturity, total return to private equity and real estate funds. Overall, we see the complexity of fund portfolios increasing and clients seeking more and more flexibility in terms of investment strategy. We also assisted a number of our clients to restructure their products, a number of them converting to Ucits funds. Which are the top one or two regulations that you are most observing at present from a TPA point of view?
It seems the regulatory tsunami has calmed down. Whilst some regulations, i.e. on the derivatives side, impacted a larger range of processes, focus has shifted to data management quality, transparency and reporting, e.g. for MiFID II, MMF or CRS. The financial effort to cover the regulatory requirements remains a burden for mid-sized operations. How have market trends in the past year shaped the demands of your clients?
Since interest rates across the key currencies remain at an historically low level, clients keep trying to generate performance with other strategies. This drives the ongoing demand for alternative asset classes. Whilst the number of new fund launches is still high, we see increasing challenges for the investment managers to identify suitable investment targets. On the regulatory set-up, we can confirm our strong market position of mature set-ups of Ucits and Aifs – too early to judge whether driver for Raif is time-to-market or assumed but not confirmed cost advantage.
DIANE MACFARLANE, EXECUTIVE DIRECTOR, HEAD OF GLOBAL FUND SERVICES, EMEA, JP MORGAN About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
We’ve seen a measured level of launches this year as clients have been managing their fund ranges carefully and keeping a focus on costs. Multi-asset funds have been one area of increased activity with many clients seeking to ensure these products are in their range. We’ve also seen an increased demand for funds investing in higher-yielding more illiquid assets such as bank loans. Which are the top one or two regulations that you are most observing at present from a TPA point of view?
MiFID II has a wide impact across our business and our clients, and we have a sizeable team in place to ensure readiness. We are also working with clients to help navigate the implications of the Esma opinion on share classes, which, combined with mandatory collateral on foreign exchange forwards used for hedging, will undoubtedly adapt the shape of many investment funds going forward. How have market trends in the past year shaped the demands of your clients?
The low interest rate environment continues to influence the types of products our clients are seeking support for. Regulation is another key area, in particular demands around increased transparency on product charges and investor types. Much of our focus is on working with clients to provide data that helps them to meet the increasing reporting requirements.
STUART PINNINGTON, GROUP HEAD OF CLIENT SERVICE – FUNDS & CORPORATE, JTC FUND SERVICES About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
During the course of 2017 we supported the launch of 20-30 funds across a broad range of asset classes including real estate, private equity, debt, art, hedge, equities and infrastructure. We have seen
a particular interest in more esoteric strategies where managers are looking for new opportunities presenting larger potential upsides. How have market trends in the past year shaped the demands of your clients?
Market uncertainty has slowed down the launch of new funds and increasingly we are being asked to provide more support to managers, particularly in relation to fundraising. A competitive market combined with pressure on managers in terms of performance and investor scrutiny has driven increased reliance upon administrators in terms of compliance and investor reporting. As such, systems capabilities are key. End of part 1. ©2017 funds europe

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