A survey of Spains asset management industry has found that 90% of foreign managers and all local Spanish managers expect an increase in the number of fund managers outsourcing certain functions in the coming years. According to the survey, carried out jointly by RBC Dexia and Accenture, 90% of those surveyed said there would be an increase in the diversity of functions outsourced in coming years.
The report, entitled The Spanish Investment Market Evolution and Change predicts sweeping changes to the Spanish investment industry with the concentration of the industry into fewer, more specialized managers and a stronger focus on improving efficiency and performance. Spains investment industry has more than six million shareholders and investors, with combined assets of 200 billion and a further 85 billion invested in pension funds.
Of the 33 Spanish investment companies surveyed for the report, 95% of local managers and 91% of foreign managers cited increased assets under management as a key indicator of success over the next two years. While the size of the Spanish funds industry is small (47 million) compared to Switzerland (300 million) and the UK (262 million), concern is mounting over contraction in the total number of funds, which have decreased by 20% to 2,500 in the passed three years due to industry consolidation.
In the current climate, it is essential for all countries to promote domestic savings, especially Spain, and this should therefore be viewed as a priority area for legislation. With regard to collective investment undertakings (CIUs), Spanish regulations have steadily converged with those of other European Union member states, says the report.
Over 80% of independent managers in Spain believe that the UCITS IV directive will make it easier to distribute investment funds abroad by creating a common regulatory environment. However, 70% of local managers were also concerned that it would lead to increased competition from overseas funds while independent managers were worried it would result in increased reporting obligations.
However, some obstacles to full harmonization still remain and in the more competitive regulatory context that has arisen out of transposition of the UCITS IV directive, such convergence is more necessary than ever.
The survey finds a widespread perception among fund managers operating in Spain that they need to focus on the core functions of their business. This is demonstrated by the fact that performance is listed as the main measure of success for coming years amongst those companies surveyed.
Our survey results indicate that fund managers understand that suitable outsourcing of services can result in an increase in the service quality provided to clients, says the survey report. Specifically, 64% of local fund manager respondents to our survey agreed with this view. At the same time, 68% of Spanish managers who responded to our survey believe that outsourcing could improve client cost structures.
The results of the survey show that the most appealing factors of outsourcing for fund managers operating in Spain include cost reduction, access to new technology and improvements in technological capacities, allowing for improvements in service quality and avoiding costly investment. 90% cite avoiding costly investment as very important in terms of the benefits to them, followed by access to new technology and improving service quality, upgrading IT and applications (86% each) and cost reductions (83%)
Respondents listed the outsourcing service providers reputation (76%), and its solvency (67%), and the fact that it guarantees a competitive cost (72%) as their main decision-making criteria for the selection process.
Surveyed on the difficulties of outsourcing, 92% of bank-owned fund managers cited employment regulation as either important or very important. Over 70% (75%) of organizations listed a possible negative impact on quality as being a risk factor. 75% of the participating bank-owned managers also cited the possibility of not achieving savings during the first year as either important or very important.
The complexity of outsourcing was revealed to be a major theme among managers. 50% of bank-owned managers said the possibility of not obtaining average savings in the first year of the outsourcing contract was very important, while 50% said the impact outsourcing has on quality was also very important.
A majority of managers revealed loss of control over outsourced functions as very important, while 55% of independent managers said the negative impact on quality and 47% said reputational risk and 42% said the complexity of the outsourcing process was also a major concern.
Jose Maria Alonso-Gama, managing director of RBC Dexia in Spain, said: Spanish firms are concentrating on bottom-line indicators such as fund performance and increased assets under management. They recognize the need to restore credibility and investor confidence by showing they are delivering on their performance promises.
(JDC)