On Thursday the U.K. Financial Conduct Authority (FCA) granted approval to Societe Generale Securities Services (SGSS) to offer trustee and depository services for U.K. UCITS and alternative investment funds. At a time of heightened consolidation in the fund administration industry, and regulatory requirements continuously piling up for fund managers, it is becoming increasingly important for fund administrators to offer a full range of services. Bertrand Blanchard, SGSS country manager in the U.K., Michael le Garignon, head of sales, Business Development and Relationship manager in the U.K., and David Painter, head of Trustee and Depository Services in the U.K., speak to Global Custodian on the significance of the approval.
GC: How significant is the ruling from the FCA for Societe Generale’s strategy in the fund industry?
BB: The ruling was really the missing piece for SGSS’s strategy in the U.K. Our target is to provide a comprehensive offering for hybrid wealth managers and asset managers. SGSS is investing a lot of money in our European custody platform, and this is important for our other investments in the U.K.
MLG: We felt when we set the business strategy in place that we needed to bring local expertise into local markets. We are very much leveraging our global expertise in London and the U.K. by creating a depository team, a custody team, and fund services team in London, and leveraging our bespoke global operations and system capabilities. But we do believe it is important to be on the ground to provide services to local clients.
GC: Is the U.K. market growing in importance for fund administrators?
MLG: The UK is a significant market and has been recognised as such. We are very strong in mainland Europe, but what we want to do is move into a more international marketplace and provide broader services. A lot of our clients are looking to extend their distribution capabilities and invest into other markets to find new investors into fund structures. The U.K. is a very critical point for us because it gives us that international coverage. There is a special decision making segment that sits within the UK around asset owners and asset gatherers, and the primary purpose is to access and unlock that international client base and partner with existing larger European clients with the U.K.
GC: How different is the U.K. with the rest of Europe for establishing funds?
DP: There aren’t any favourite locations in Europe for starting up funds. When you start from scratch it is a level playing field. The environment in the U.K. has become more benign of late. Therefore if you were to start from scratch, the pool of experienced labour is quite an influential factor. Arguably in the U.K. it is a much bigger market in terms of the number of specialised and experienced personnel, so you are not subject to short-term influences. Historically in Ireland and Luxembourg there have been fights for talent, where salaries have gone up but arguably the skill levels have not risen in line. If you are operating on a pan-European basis, it makes it easier to leverage your locations. But as far as the U.K. expectations for trustee and depositary services are concerned, that is more difficult because people want local presence on the ground. For trustee and depositary, it is not so easy to export differing approaches between locations in Europe, notwithstanding the pan European application of UCITS V and AIFMD. I am never sure that will disappear despite the fact the regulators want a level playing field.
GC: What products are U.K. funds demanding in comparison to the rest of Europe?
DP: There isn’t really any difference in demand, but more about execution. Alongside the main pillars, which are trustee and depository, custody, fund administration, and transfer agency, there will always be new and add-on products to enhance that service like securities lending. You won’t find any difference in the basic requirements across locations; it is just a matter of execution.
GC: How important is packaging custody and fund admin services becoming?
DP: You get a more seamless service. If you are operating as a trustee and depository and custodian, and you are working with the same fund administrator or transfer agent, you are working together but with the appropriate Chinese walls between the trustee and depository function and the services which the regulator is very keen to make sure are in place. It is that balance of providing that seamless service against the independence of the trustee and depository within the same umbrella organisation that is the key challenge.
MLG: We are in a price compressed market, and it is about our clients leveraging their fees and costs. It is cost effective for both the provider and end client if they can reach an agreement to provide a more packaged service offer. Those fund admins providing fund admin on a stand-alone basis will struggle because when they look at their fees they are not able to leverage other service related revenue such as custody, securities lending, clearing and settlement etc. There is a play on leverage both from a provider perspective and client perspective.