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Fund managers brace for regulatory challenges as outsourcing and innovation take centre stage
Invest
Fund managers brace for regulatory challenges as outsourcing and innovation take centre stage
As regulatory complexities continue to mount, fund managers are increasingly turning to outsourcing and prioritising innovation to navigate the challenging landscape, according to a new study by Carne Group, a leading provider of fund regulation and governance solutions.
Fund managers brace for regulatory challenges as outsourcing and innovation take centre stage
As regulatory complexities continue to mount, fund managers are increasingly turning to outsourcing and prioritising innovation to navigate the challenging landscape, according to a new study by Carne Group, a leading provider of fund regulation and governance solutions.
The research, which surveyed fund managers in 10 countries collectively managing $1.6 trillion, found that 99% of respondents believe it will become much harder to navigate regulatory complexities over the next two years.
In response, 91% of fund managers expect to make greater use of third-party service providers for their fund administration functions in the next 12 months, with 41% anticipating a dramatic increase and 50% expecting a slight increase.
John Donohoe, Group CEO at Carne Group, commented: "Many asset managers are struggling with the impact of the continually increasing regulatory burden, the costs to their businesses and impact on investor returns. To address this, they are making greater use of third-party specialist providers, enabling them to speed up their time to revenue and to focus on what matters most... product innovation, delivering investment performance and raising assets."
The study identified the top three reasons for the increased outsourcing as difficulty in recruiting appropriate staff, the growing burden of regulation, and operating in more jurisdictions.
Furthermore, 79% of fund managers surveyed expect the level of outsourcing of fund management company administration to third parties to increase over the next three years, primarily to enable the launch of different product sets, increase speed to market, and deliver stronger fiduciary management of funds.
A separate global study by Carne Group with wealth managers and institutional investors managing $1.7 trillion in assets found that 94% believe managing the regulatory environment will become much harder between now and 2026, with 64% planning to outsource more administrative functions to third-party service providers in the next 12 months.
As outsourcing levels rise, the fund management sector can focus more on innovation. The main factors driving innovation, according to the surveyed fund managers, are advances in technology, increased use of alternative data, and greater insight into the performance of alternative asset classes in different environments.
"Cost pressures and fee compression are leading to consolidation in the fund management industry. As this gathers pace, the winners will be those that find effective ways to navigate the changing environment. Successfully addressing this will also allow them to explore greater product innovation and differentiation, and faster speed to market," Donohoe added.
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