GC: You joined with the ambition to build a different – perhaps unique – depositary proposition, could you tell us more about your vision?
Mark Crathern: We have the largest UK UCITS business from a depositary perspective – around 35% of the market – and a long history, but we had focussed on our statutory responsibilities not on how we could help our clients and their investors. Competitor providers have long been of the view that the bundle proposition would win the day and effectively eliminate independent depositaries, but the world is changing. From a client and regulatory standpoint, the independent model is coming back into fashion as good governance comes to the fore. I wanted to transform this business away from being purely wedded to regulatory requirements and build the depositary of the future. The goal is to become an automated, digital, cloud-based provider of depositary services but with the ability to share relevant insights based on the comprehensive data we have. This will enable us to talk about liquidity, ESG, thematic trends and events going on in share classes or certain investor groups which are insightful for boards and managers.
GC: Why is data such an integral part of what you’re trying to achieve?
MC: In order to achieve our goal, we need to step forward, leverage technology and use the data we have because it is incredibly rich. You don’t do that by bundling huge amounts of data that we get from transfer agents, third-party administrators, fund managers and custodians that we put in these pretty iron mountain boxes and store them in a site never to be seen again. The aim is to go beyond the required regulatory reporting and provide insights that are independent and complimentary to those the fund manager is producing to their end investor community. Having an independent lens on the verification of the reports they are seeing – so it’s not just the fund manager’s version of ESG, liquidity and performance – but there’s an independent partner that is verifying this data and standing behind the output.
The buy-side spends around $9 billion a year on data and there is a significant amount of overlap. From a fund manager perspective, they are getting reports from their transfer agents, third-party administrators, fund accountants and custodians, but the stand-alone reports are often difficult to integrate. The work we are doing to connect the money coming into the funds to the investments being made means that we are doing the heavy lifting. Our clients can get their reports and analysis from their depositary as we are becoming the central hub of all of that data.
GC: How do you see the role of the depositary and trustee evolving?
MC: The trustee and depositary landscape is at an inflection point, and it has a choice – it can either respond to regulation, or you can help shape it to benefit investors. I’d far rather be there shaping it, working with regulators, the ACDs and the fund boards to come up with best-in-class solutions that actually puts better protections around investors. Whether it is addressing the illiquid assets and daily dealing of funds, or, to see if we’re going to bring some more orderly function into the marketplace and avoid the duplication that exists across the industry at the moment bringing better value and returns for investors. It’s just a question of whether you’ll be reactive or proactive. That’s where we’re committed to the proactive side. We’re not aiming to be the biggest, but we have the ambition to be a leader in governance and depositary services in the markets we operate in.
GC: What’s the client feedback been like so far and what milestones are you eyeing?
MC: We believe we can triple our business in five years. It’s ambitious, but we think that is realistic given the strength of our institutional banking relationships, particularly in the alternative sector, the relationships with our clients in the UK and our appetite to provide depositary services across UCITS and alternative funds in Ireland and Luxembourg. We’re going to need to break the mould where the bundled proposition is king on the UCITS side in Ireland and Luxembourg, but we see a clear appetite and opportunity. We need to find the right solution where we work with their custodians but provide that independent lens in those jurisdictions the same way we do in the UK. The clients are interested, we are working on the required licences and permissions, but the beauty of our platform is that it is re-usable in any market.