Growth for ETFs, ESG and private markets
Daron Pearce, CEO, BNY Mellon Asset Servicing EMEA
First, ETFs. We are seeing increased interest in launching new fund ranges in Europe, from both US asset managers and larger UK managers. This could add up to a significant number of new entrants to the European ETF market in 2019.
Second, private markets. The potential for alpha through exposure to private equity, real estate, infrastructure and private debt continues to encourage capital. Private debt is a particularly strong growth area. 2019 may see an accelerated focus by private markets investment managers on processes and outsourcing.
Third, if 2018 has been the year of talking about ESG then in 2019 we are likely to see that turn more decidedly into action. While some key elements are not fully in place – in particular the measurement of non-financial performance – 2019 may be the year when ESG truly goes mainstream.
Crypto: The dawn of a new asset class
Walter Verbeke, global head of business model and innovation, Euroclear
Despite the initial hype and volatility around cryptocurrencies, we do see momentum within capital markets towards a new asset class. One example is the piloting of securities token offerings (STOs) as a possible small and medium size enterprise funding channel. We have also seen good progress in the DLT/blockchain space within the securities world. Some of the initiatives that are contributing to this momentum include LiquidShare in Paris, Australia Stock Exchange’s work with Digital Asset Holdings and the World Bank’s recent launch of the first blockchain based bond – BONDI.
Asset managers, custodians and market infrastructures are all moving into or closely following the crypto asset space. It will be interesting to see in 2019 how all these market players address the need for crypto and digital assets. The objective will be the same, whether it be in the traditional physical security or crypto world – a need for a safe and efficient environment that gives comfort, allows liquidity generation for investors and the facilitation of trading and servicing of those assets.
Custodians will branch out further into ESG
Paul Sinthunont, analyst, Aite Group
The move towards holistic investment analysis with the incorporation of environmental, social and governance factors (ESG) has opened new business opportunities for custody and asset servicing. One of the new opportunities includes ESG reporting. For example, CACEIS recently launched a reporting service and partnering with Vigeo Eiris, a large ESG data provider to support the ESG related reporting. The other area of opportunity will be data and analytics, a need State Street is already servicing with the ESGX platform, a web-based tool that helps identify and quantify clients’ ESG exposures. The platform supports multiple ESG data vendors and also acts as redistributor of the data. As ESG integration continues to move into the mainstream and reporting becomes increasingly standardized and potentially mandatory, it presents strong area of growth for custodians. At this early stage, it will be seen as a differentiating factor, with partnerships or even acquisition of ESG data providers by custodians, likely for 2019.
Asset managers will up their demands
Richard Street, head of global client coverage UK, Europe & Middle East, RBC Investor & Treasury Services
As we move into the New Year, I believe we will see asset managers demanding more from their providers to drive greater value and remain competitive in an ever-challenging market. As cost pressures continue to rise, asset managers will seek increased efficiencies and rely on their providers to help them deliver new capabilities and savings.
Forward thinking providers will partner with their clients to facilitate a more advanced data environment, offering solutions with significant flexibility. These data services will benefit asset managers across all functions to become a ‘golden data source’ supporting not just operational performance, but offering insight and adding value in all areas of business management, regulatory reporting, sales and distributions and investment departments.
Asset managers will embrace horizontal integration
Chris Remondi, partner, Brown Brothers Harriman
The pressure on asset managers to deliver returns while improving their operating models to support growth, increase efficiency and improve risk oversight will not diminish in the year ahead. But 2019 will be the year in which asset managers begin to realise the opportunity of horizontal integration across their operating models, counterparties, and third-party providers. Emerging technologies, improved connectivity and an ability to create an enterprise view of data across mandates and end-to-end operating models will provide opportunities to improve overall performance. Increased competency in all of these areas will grow in importance as margin compression continues its downward trend.