These are stressful times for the mutual fund industry.
An obvious statement, but one authored by a colleague ten years ago. Even more interesting is that the trends cited then are the same concerns that we hear from clients today. So what has changed?
There is no doubt that the landscape of U.S. financial regulation has changed over the last decade and that it will continue to change. Regulations are no longer specific to one business segment or to one geography. From non-U.S. regulations impacting U.S.-based managers and funds, to U.S. regulations impacting non-U.S.-based managers and funds, global regulators are studying proposals by their regional counterparts to determine the effect of proposed regulations. We have been able to leverage our position as a global service provider by coordinating our regional subject matter experts to review proposed regulations and to assist in anticipating the needs of our clients on a global basis.
The need for increased reporting due to changing regulatory requirements is creating a demand among managers for more data and increased support in meeting the requirements of new regulations. Where in the past a manager would review a new requirement and then build a solution to support it, they are now starting to partner with their service providers to develop solutions. With limited resources and an eye to managing expenses, many clients prefer not to build an in-house regulatory review team. Many have sought to leverage the efforts of their service providers to identify and analyze key regulatory issues and the anticipated impact of the regulation on the servicing needs of their fund clients.
With profitability projected to continue to remain flat, Investment Managers are challenged with how to do more with less. Requirements to support new regulatory reporting and investor demand for more data require dollars, resources and intellectual capital. The strain of increased legal, regulatory and compliance demands on their infrastructure, coupled with aging technology, continues to fuel interest in the outsourcing of functions currently performed in-house. While at one time outsourcing was primarily focused on back-office functions, managers have shown increasing interest in the outsourcing of middle-office functions, allowing them to concentrate their resources on gathering and managing assets.
The old adage about "what is old is new" has certainly applied to mutual fund industry trends over the past decade and there is a good chance that one of my colleagues will be writing an article on the same topic in the next decade.
The views expressed within this article are those of the authors only and not those of BNY Mellon or any of its subsidiaries or affiliates.
Sandy McKenna is a Managing Director in the Asset Servicing Global Product Management group at BNY Mellon.
To view the complete version of this Industry Commentary, visit the Mutual Fund Service Guide website at mmexecutive.com/mutual-fund-guide. Click on the Regulation/Compliance section.