Meeting regulatory requirements is the top issue that keeps Australian asset owners and managers awake at night.

 

The finding was revealed in the latest asset administration and custody review by BNP Paribas Securities Services in Australia. It was undertaken to gauge the industry’s outlook to the changing market, including shifts in investors' appetite, growth in cross- border funds, regulatory changes and increasing complexity.

 

“The Review found the top issue that keeps those in the industry awake of an evening is government regulation,” said Peter Baker, managing director of BNP Paribas Securities Services in Australia. “Two thirds (67%) are losing sleep over it. Almost nine in 10 respondents (87%) also report increased costs due to meeting those regulations, costs which can’t easily be passed on to end investors. A further 8% are uncertain of the impact regulation had on their cost base.”

 

Interestingly, two out of five report that external custodians and administrators helped them overcome this challenge and reduce costs.

 

“The most concerning operational issue is risk management - improving risk analytics and improving the risk-return profile of their portfolios – which worries over two-thirds of respondents. More than half (53%) want a better understanding of their investment risk, with two out of five (42%) not satisfied with their risk reporting, ” added Baker.

 

Several respondents reported they are now concerned about more issues than ever before.



Baker noted: “The next major issue that concerns respondents is meeting performance targets (45%). Staff management and resourcing is another major concern, worrying a third (32%).”

 

Other findings of the review:

 

• Data management - storage, access, quality, costs - concerns a third of the industry (36%)

• A third of respondents (31%) worry about how to reduce costs further

• A fifth of respondents (20%) have never stress-tested - despite regulatory

requirements for superannuation funds to do so, and

• Only 5% said nothing kept them awake.

 

Baker said one of his priorities is partnering with asset managers and owners to help them solve these issues. “Client reporting, for example, is increasingly being entrusted to third party providers to help asset owners and managers better optimize data and analytics, reduce costs and empower management.

“Several respondents report that by outsourcing non-core administrative functions they have been able to better focus on managing their investments and generating value for their stakeholders.”

 

The review surveyed 110 asset owners and managers in Australia in July 2014. The majority of respondents were asset managers (30%) and owners (pension funds 26%, endowments 5% and sovereign wealth funds 3%) with 10% bank asset managers. Some 58% of respondents were CEOs, CIOs, COO, CFO or other c-suite management.