Regulatory change and the shift in economic power have intensified the need for asset managers to expand cross-border fund distribution. However, gaining a deeper understanding of investor behaviour and fund sales trends remains a challenge. Does the answer lie with the data held by the transfer agent?
The transfer agency industry (TA) has been devoting time and energy in complying with regulation. It has invested considerably in people and infrastructure to implement the changes to provide accurate investor information.
At the same time, the increase in cross-border fund distribution continues as asset managers aim to maximise subscriptions in a context of competitive domestic markets and margin compression. The introduction of UCITS IV and more recently AIFMD has helped to energise cross-border distribution due to fund passporting. But while the sources of potential fund sales may increase, gaining an insight to fully appreciate individual and collective fund sales performance as well as market trends remains challenging.
According to KPMG’s report “Investing in the Future”, the need to gain this intelligence is under-rated. “While IT is attracting a significant amount of investment, it is not being channelled into the right areas”, the report suggests. Just as the TA has focused on adhering to their compliance obligations, the same can be said for asset managers. As a result, a potentially large mine of data is trapped within TA systems because the appropriate mechanisms had not been created to deliver it.
TA processes hundreds of millions of transactions every year. By repurposing this data, they could be in a position to support their clients in gaining the valuable insight into cross-border fund sales. For example, if a TA was to integrate transactional data with macroeconomic trends, which asset managers require for successful product development, the TA could provide reporting to support the asset manager’s regulatory compliance and its sales management needs. It would also provide useful intelligence to help identify sales patterns, which could in turn enable the nurturing of marketing plans and inevitably help increase returns.
Arguably this information is already available today. However, the current methods required in presenting the bigger picture of market trends, competitive analysis and macro-economic data are piecemeal, time consuming and expensive to attain and analyse.
Leveraging big data is not a new concept but TA has been slower to react, largely due to legacy technology issues. Given that most regulatory requirements in TA require more data to be stored and validated, the challenge of implementation has become a huge opportunity.
Richard Clarke, Director, Shareholder Services, RBC Investor & Treasury Services