Asset managers are feeling unprepared for future challenges despite already making strides to improve fund oversight, according to a survey of North American asset managers.
The research, carried out by Milestone Group, surveyed leading organizations and showed that 40% of respondents felt their current operation was unprepared to meet anticipated regulatory changes and desired an increase in automation. However, approximately 61% would not wait for new regulations to arrive before strengthening oversight, as asset managers and trustees make protecting their reputation and the interests of investors their top priority.
FUND PROVIDER IMPACT
What do these results mean for mutual funds and ETF providers? In other words, how does increased oversight automation benefit fund servicers?
Those providers chartered with handling the valuation and services for mutual funds and ETFs can expect a strengthened partnership and sense of shared responsibility with their clients, along with consistency in format and timing of the actual data being requested. Ultimately, it's an opportunity for them to assess their ability to meet service levels for their current and desired offerings and to ensure their infrastructure will allow for the anticipated increasing demand for transparency.
COMMON AREAS FOR AUTOMATION
The most common areas for automation: Outsourced fund processing or fund accounting activities are being automated, for firms that want to maintain independent in-house verification of service providers outputs.
The research found that following the financial crisis, asset managers have increasingly handed out more of their back, mid and even front office work to service providers.
While the industry recognizes the importance of regulation, the reputation they've worked to build is the major factor for firms looking to strengthen their fund oversight functions. An education process is taking place across the market, and it is positive to see that most already understand the need for performing some level of operational oversight of their service provider outputs beyond periodic service level meetings.
Rather than performing manually intensive tasks like collecting and entering data into spreadsheets to perform checks, organizations need to have a platform in place that centralizes and automates the process of validating key data points from their suppliers, allowing asset managers to focus on analyzing and managing exceptions, often within tight time windows. For all firms that outsource key functions such as NAV calculation, oversight automation is essential to reducing operational risk. Outsourced fund processing or fund accounting activities are being automated, for firms that want to maintain independent in-house verification of service providers outputs.
Marlena Fitts is a product marketing leader at Milestone Group, an investment management company.