Innovation is key
01 May 2024
Jack McRae speaks to a number of European fund administrators on how they are addressing some of the challenges facing the industry
Image: images by worawut/stock.adobe.com
Navita Yadav
Super regional head of Europe
Apex Group
David Fowler
European head of fund administration
Ogier Global
Stéphanie Gaudoux
Head of coverage for continental Europe
Societe Generale Securities Services
Ashley Vardon
Senior Director (based in Jersey)
JTC
Yann Bloch
Head of product and pre-sales Americas
NeoXam
Anne de Nonancourt
Product development manager
efa
Ishita Shah
Global chief commercial officer
Gen II Fund Services
Michael Johnson
Chief commercial officer Europe
Gen II Fund Services
“The new challenges posed by macro-conditions have prompted managers, allocators and fund admins to become more innovative, which we think will continue to prevail in 2024,” Navita Yadav, super regional head of Europe at Apex Group, explains.
Fund administrators across Europe are responding to various market challenges and trends throughout the industry.
These have been shaped by sociopolitical factors, regulatory changes and the expansion of technology, but what do the industry’s fund administrators consider these trends to be?
Yadav continues: “Private assets are clearly leading the way in key European markets with private debt as a leading asset class, but private equity is also coming in close, followed by real assets”.
This is expanded upon by both David Fowler, European head of fund administration at Ogier Global, and Stéphanie Gaudoux, head of coverage for continental Europe at Société Générale Securities Services (SGSS).
Ogier Global’s Fowler argues that “the fund administration sector in Europe has been through a significant period of consolidation”. This involves larger firms in the industry acquiring smaller groups in order to expand their offerings and global reach.
SGSS’s Stéphanie Gaudoux echoes Fowler’s argument but is keen to emphasise the impact this is having on the industry.
She warns: “Consolidation in the asset management market is putting fund administration under considerable pressure in terms of production cost and quality, as well as flexibility.”
The industry has also focused its investment and efforts into expanding its ESG reporting and compliance solutions.
Gaudoux continues to predict that “the trend towards ESG investing is expected to continue, and fund administrators will need to offer ESG reporting and other related services to meet the demands of their clients”.
The demands of the client
For SGSS’s Gaudoux, the demands of the market and their clients are clear: “Tailor-made, local and industrial.”
She develops: “The demand for tailor-made and local [solutions] best serve our customers, and ‘industrial’ lowers our production costs. To achieve this, our setup combines offshore activities organised as a ‘factory model by process’ with a local presence organised by customers.”
Ogier Global’s Fowler shares the belief that clients want teams and solutions customised to their needs. He explains: “Our clients expect high-quality services provided by a dedicated team of experts who understand their structure, their asset class and are flexible and responsive to their needs.
“Implementing advanced software solutions for fund accounting, investor reporting, and risk management improves the client and investor experience.”
For Ashley Vardon, senior director at JTC (based in Jersey), responding to the demands of their clients is integral to their business. He says: “Managers and investors are particularly interested in how data is managed, from client due diligence to bank account details to payment transactions. Ensuring the business is keeping pace with investment in this space is necessary to meet client expectations.”
Keeping pace
One of the ways that JTC maintains pace with their clients is through technological developments. Yet, the drive to enhance technology has also been shaped by the demands of regulatory bodies. Vardon explains: “Technological enhancements continue to be made across the industry. The increased regulatory burden is also impacting the market, leading to technology advances in specific areas such as ESG reporting for impact funds and the investment in regulatory technology to automate compliance reporting.”
Yann Bloch, head of product and pre-sales America at NeoXam, insists that modern regulatory requirements require modern technology solutions. “Take ESG funds,” Bloch speculates. “The required data can arrive in many different forms, and from a plethora of different suppliers who specialise in very particular types of sustainable investing information.”
Bloch goes further and suggests that “many financial institutions are realising they can no longer rely on legacy data systems — which sometimes may be little more than a scattering of excel spreadsheets across the business — to manage and utilise the vast amounts of data being consumed.”
He is concerned that, without the modern infrastructure in place, “the information will not be utilised to its maximum potential, and that it may not even be easily accessible to all relevant teams within the institution”.
“It is becoming increasingly imperative that firms adopt modern data infrastructures to avoid drowning in the deluge of data that is now an innate part of the modern European fund administration market,” Bloch adds.
Ogier Global’s Fowler, on the other hand, points to a wider, global challenge that technology will have to keep in line with. “Cyber security will become even more of a focus,” he explains.
“With the current global hostilities increasing the threats of cyberattacks and security breaches, technology will advance to keep up with these threats.”
Alongside a strengthening of cyber security, Fowler, as with many in the industry, is expecting a greater use and reliance on AI. In addition, he suggests: “Further use of blockchain technologies is likely, with the potential for blockchain to streamline the settlement process, enhance transparency, and reduce fraud.”
Following the rules
“IT security is a growing concern,” Anne de Nonancourt, product development manager at efa, contends. “Although fund administrators are not in scope of regulations such as the Digital Operational Resilience Act (DORA), our interdependence with all other players means that we must comply with the same rules.”
Fund administrators must stay abreast of regulation developments and changes across the industry in order to ensure they remain compliant within their own space. This is “the main regulatory challenge” for fund administrators in Europe. De Nonancourt says: “An illustration of this is the number of fines imposed by regulators that can be observed in all markets.”
Ishita Shah, global chief commercial officer, and Michael Johnson, chief commercial officer Europe, of Gen II Fund Services go further, saying: “Regulation is an integral aspect of the European business landscape, providing reassurance to clients and investors when managed effectively.
“The regulatory environment is expected to continue evolving, introducing additional complexities to our clients’ reporting obligations. As fund administrators, our responsibility is to stay ahead in technological advancements, ensuring compliance with current standards and proactively developing solutions to anticipate future regulatory enhancements.”
NeoXam’s Bloch explores the regulatory changes on the horizon for the European fund administration space. He points to the UK’s Financial Conduct Authority (FCA) announcing plans to review private market valuations, and the European Council placing leverage limits on private debt funds as indicators that regulators are growing concerned with “allocations to private credit from systemically important institutions. including insurance firms and pension funds, continuing to rise”.
Bloch understands their concern, “given that the substantial inflow of money flooding into the sector is being channelled into debt funds that offer little to no transparency”.
The overarching discussion point with regards to regulation across the entire financial services sector, is North America’s impending switch to a T+1 settlement cycle, starting on May 27.
SGSS’s Gaudoux believes that the UK and Europe will be closely monitoring the switch — but, at “two different paces”.
She points to the UK’s aim to move to a T+1 settlement cycle by the end of 2027, with a preliminary milestone during 2025. This milestone aims to have achieved all prerequisites established in the Geffen Report.
The EU’s European Securities and Markets Authority (ESMA), will, likely by the end of 2024, “report on the feasibility, the advantages, and challenges of a move to T+1, and to potentially propose a point in time”, Gaudoux explains.
She also highlights the review of the EU’s Sustainable Finance Disclosure Regulation (SFDR), which “includes the potential establishment of a categorisation system to replace article eight and nine classification and, or, to reinforce reuse of labels”.
NeoXam’s Bloch details the impact of overhauling SFDR which means “fund administrators can expect to adjust their SFDR reporting over the coming years given that a ‘SFDR 2.0’ regulation might emerge”.
A deeper challenge
Although the demands of clients, technology and regulation steal the headlines as key challenges for European fund administrators, there remains one major, underlying problem for the industry. Given a significant number of fund administrators in Europe are stationed in the likes of Luxembourg, the Channel Islands and Ireland, they naturally face difficulties in recruiting and retaining staff. The smaller populations of these jurisdictions makes finding and holding talent difficult.
Gen II’s Shah and Johnson consider this to be a constant hurdle. They say: “In the context of the globally expanding administrative industry, attracting and developing skilled talent remains a persistent challenge.
“We rely on the distinguished reputation of our various locations to attract a significant share of new talent and, critically, to retain the exceptional individuals we already employ.”
On the other hand, efa’s de Nonancourt explains how accruing the best talent has always been a “general challenge” for firms across Luxembourg. The firm is part of the Universal Investment (UI) Group, which helps remedy the challenges smaller fund administrators face in attracting new staff. De Nonancourt says efa has been addressing this challenge by capitalising on UI Group’s resources and our various locations. “More teams are hybrid [working], and team members may be located in different countries depending on the required skills. We therefore attach paramount importance to the quality of our managers, who are the guarantors of the success of this model,” she adds.
Apex Group’s Yadav explained how the new challenges facing the space had “prompted managers, allocators and fund admins to become more innovative”.
However, what is harder to combat is the problems created by the fund administration industry’s own success and growth.
“In many of the major markets, such as the Channel Islands, Ireland and Luxembourg, the growth of the industry has outpaced the growth of talent available, so the markets are ultra-competitive from an employment perspective,” Yadav explains. Despite this challenge, Yadav argues that, once again, the fund administration industry is finding innovative solutions to this challenge.
“This has often meant outsourcing work to global operating centres in order to keep pace with client demands,” she explains. “We are making a lot of investment in skill development and robust training programmes for our staff on shore, mid-shore and in service centres.”
Whether confronted with challenges of updating technological systems, responding to the ever-changing regulatory landscape, or finding the best and brightest talent to shape these solutions, the underlying message is clear — innovation is key.
Super regional head of Europe
Apex Group
David Fowler
European head of fund administration
Ogier Global
Stéphanie Gaudoux
Head of coverage for continental Europe
Societe Generale Securities Services
Ashley Vardon
Senior Director (based in Jersey)
JTC
Yann Bloch
Head of product and pre-sales Americas
NeoXam
Anne de Nonancourt
Product development manager
efa
Ishita Shah
Global chief commercial officer
Gen II Fund Services
Michael Johnson
Chief commercial officer Europe
Gen II Fund Services
“The new challenges posed by macro-conditions have prompted managers, allocators and fund admins to become more innovative, which we think will continue to prevail in 2024,” Navita Yadav, super regional head of Europe at Apex Group, explains.
Fund administrators across Europe are responding to various market challenges and trends throughout the industry.
These have been shaped by sociopolitical factors, regulatory changes and the expansion of technology, but what do the industry’s fund administrators consider these trends to be?
Yadav continues: “Private assets are clearly leading the way in key European markets with private debt as a leading asset class, but private equity is also coming in close, followed by real assets”.
This is expanded upon by both David Fowler, European head of fund administration at Ogier Global, and Stéphanie Gaudoux, head of coverage for continental Europe at Société Générale Securities Services (SGSS).
Ogier Global’s Fowler argues that “the fund administration sector in Europe has been through a significant period of consolidation”. This involves larger firms in the industry acquiring smaller groups in order to expand their offerings and global reach.
SGSS’s Stéphanie Gaudoux echoes Fowler’s argument but is keen to emphasise the impact this is having on the industry.
She warns: “Consolidation in the asset management market is putting fund administration under considerable pressure in terms of production cost and quality, as well as flexibility.”
The industry has also focused its investment and efforts into expanding its ESG reporting and compliance solutions.
Gaudoux continues to predict that “the trend towards ESG investing is expected to continue, and fund administrators will need to offer ESG reporting and other related services to meet the demands of their clients”.
The demands of the client
For SGSS’s Gaudoux, the demands of the market and their clients are clear: “Tailor-made, local and industrial.”
She develops: “The demand for tailor-made and local [solutions] best serve our customers, and ‘industrial’ lowers our production costs. To achieve this, our setup combines offshore activities organised as a ‘factory model by process’ with a local presence organised by customers.”
Ogier Global’s Fowler shares the belief that clients want teams and solutions customised to their needs. He explains: “Our clients expect high-quality services provided by a dedicated team of experts who understand their structure, their asset class and are flexible and responsive to their needs.
“Implementing advanced software solutions for fund accounting, investor reporting, and risk management improves the client and investor experience.”
For Ashley Vardon, senior director at JTC (based in Jersey), responding to the demands of their clients is integral to their business. He says: “Managers and investors are particularly interested in how data is managed, from client due diligence to bank account details to payment transactions. Ensuring the business is keeping pace with investment in this space is necessary to meet client expectations.”
Keeping pace
One of the ways that JTC maintains pace with their clients is through technological developments. Yet, the drive to enhance technology has also been shaped by the demands of regulatory bodies. Vardon explains: “Technological enhancements continue to be made across the industry. The increased regulatory burden is also impacting the market, leading to technology advances in specific areas such as ESG reporting for impact funds and the investment in regulatory technology to automate compliance reporting.”
Yann Bloch, head of product and pre-sales America at NeoXam, insists that modern regulatory requirements require modern technology solutions. “Take ESG funds,” Bloch speculates. “The required data can arrive in many different forms, and from a plethora of different suppliers who specialise in very particular types of sustainable investing information.”
Bloch goes further and suggests that “many financial institutions are realising they can no longer rely on legacy data systems — which sometimes may be little more than a scattering of excel spreadsheets across the business — to manage and utilise the vast amounts of data being consumed.”
He is concerned that, without the modern infrastructure in place, “the information will not be utilised to its maximum potential, and that it may not even be easily accessible to all relevant teams within the institution”.
“It is becoming increasingly imperative that firms adopt modern data infrastructures to avoid drowning in the deluge of data that is now an innate part of the modern European fund administration market,” Bloch adds.
Ogier Global’s Fowler, on the other hand, points to a wider, global challenge that technology will have to keep in line with. “Cyber security will become even more of a focus,” he explains.
“With the current global hostilities increasing the threats of cyberattacks and security breaches, technology will advance to keep up with these threats.”
Alongside a strengthening of cyber security, Fowler, as with many in the industry, is expecting a greater use and reliance on AI. In addition, he suggests: “Further use of blockchain technologies is likely, with the potential for blockchain to streamline the settlement process, enhance transparency, and reduce fraud.”
Following the rules
“IT security is a growing concern,” Anne de Nonancourt, product development manager at efa, contends. “Although fund administrators are not in scope of regulations such as the Digital Operational Resilience Act (DORA), our interdependence with all other players means that we must comply with the same rules.”
Fund administrators must stay abreast of regulation developments and changes across the industry in order to ensure they remain compliant within their own space. This is “the main regulatory challenge” for fund administrators in Europe. De Nonancourt says: “An illustration of this is the number of fines imposed by regulators that can be observed in all markets.”
Ishita Shah, global chief commercial officer, and Michael Johnson, chief commercial officer Europe, of Gen II Fund Services go further, saying: “Regulation is an integral aspect of the European business landscape, providing reassurance to clients and investors when managed effectively.
“The regulatory environment is expected to continue evolving, introducing additional complexities to our clients’ reporting obligations. As fund administrators, our responsibility is to stay ahead in technological advancements, ensuring compliance with current standards and proactively developing solutions to anticipate future regulatory enhancements.”
NeoXam’s Bloch explores the regulatory changes on the horizon for the European fund administration space. He points to the UK’s Financial Conduct Authority (FCA) announcing plans to review private market valuations, and the European Council placing leverage limits on private debt funds as indicators that regulators are growing concerned with “allocations to private credit from systemically important institutions. including insurance firms and pension funds, continuing to rise”.
Bloch understands their concern, “given that the substantial inflow of money flooding into the sector is being channelled into debt funds that offer little to no transparency”.
The overarching discussion point with regards to regulation across the entire financial services sector, is North America’s impending switch to a T+1 settlement cycle, starting on May 27.
SGSS’s Gaudoux believes that the UK and Europe will be closely monitoring the switch — but, at “two different paces”.
She points to the UK’s aim to move to a T+1 settlement cycle by the end of 2027, with a preliminary milestone during 2025. This milestone aims to have achieved all prerequisites established in the Geffen Report.
The EU’s European Securities and Markets Authority (ESMA), will, likely by the end of 2024, “report on the feasibility, the advantages, and challenges of a move to T+1, and to potentially propose a point in time”, Gaudoux explains.
She also highlights the review of the EU’s Sustainable Finance Disclosure Regulation (SFDR), which “includes the potential establishment of a categorisation system to replace article eight and nine classification and, or, to reinforce reuse of labels”.
NeoXam’s Bloch details the impact of overhauling SFDR which means “fund administrators can expect to adjust their SFDR reporting over the coming years given that a ‘SFDR 2.0’ regulation might emerge”.
A deeper challenge
Although the demands of clients, technology and regulation steal the headlines as key challenges for European fund administrators, there remains one major, underlying problem for the industry. Given a significant number of fund administrators in Europe are stationed in the likes of Luxembourg, the Channel Islands and Ireland, they naturally face difficulties in recruiting and retaining staff. The smaller populations of these jurisdictions makes finding and holding talent difficult.
Gen II’s Shah and Johnson consider this to be a constant hurdle. They say: “In the context of the globally expanding administrative industry, attracting and developing skilled talent remains a persistent challenge.
“We rely on the distinguished reputation of our various locations to attract a significant share of new talent and, critically, to retain the exceptional individuals we already employ.”
On the other hand, efa’s de Nonancourt explains how accruing the best talent has always been a “general challenge” for firms across Luxembourg. The firm is part of the Universal Investment (UI) Group, which helps remedy the challenges smaller fund administrators face in attracting new staff. De Nonancourt says efa has been addressing this challenge by capitalising on UI Group’s resources and our various locations. “More teams are hybrid [working], and team members may be located in different countries depending on the required skills. We therefore attach paramount importance to the quality of our managers, who are the guarantors of the success of this model,” she adds.
Apex Group’s Yadav explained how the new challenges facing the space had “prompted managers, allocators and fund admins to become more innovative”.
However, what is harder to combat is the problems created by the fund administration industry’s own success and growth.
“In many of the major markets, such as the Channel Islands, Ireland and Luxembourg, the growth of the industry has outpaced the growth of talent available, so the markets are ultra-competitive from an employment perspective,” Yadav explains. Despite this challenge, Yadav argues that, once again, the fund administration industry is finding innovative solutions to this challenge.
“This has often meant outsourcing work to global operating centres in order to keep pace with client demands,” she explains. “We are making a lot of investment in skill development and robust training programmes for our staff on shore, mid-shore and in service centres.”
Whether confronted with challenges of updating technological systems, responding to the ever-changing regulatory landscape, or finding the best and brightest talent to shape these solutions, the underlying message is clear — innovation is key.
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