Can Asset Managers Finally Find a Cure for Their Reporting Headaches?
From TABB Forum:
It is hard to think of another issue that has been deliberated over more than the need for more accurate reporting in recent times. The issue is that, like with so many issues relating to market infrastructure, the bigger the problem, the harder it is to actually come up with a definitive solution.
With investors scrutinising performance daily and new regulations imminent that demand more reporting, there has never been a more pressing need for asset managers to overcome their client and regulatory reporting challenges.
Impending regulatory pressures worldwide, including PRIIPS, MIFIR, SFDR and AIFMD, are asking for increased transparency around costs, risk and performance, liquidity, and now sustainability objectives. All this is reinforcing the necessity to have in-depth reporting around investments.
But regulation is by no means the only driver for an increased focus on reporting. There is clearly a realisation that service matters when it comes to creating value for investors. Both passive and active managers are trying to broaden the range of the services they offer, and they are trying to offer a service that goes beyond generating returns.
Numerous asset managers have already invested heavily in services in a bid to become more than just return generators. Some are extending the reach of their reporting business so broadly that they are even becoming tech companies with a view to retaining and winning more business.
A prime example of this is BlackRock’s Aladdin platform, an electronic system that enables clients to better manage their risk. In addition to expanding services and managing new regulatory pressures, trying to seek out operational efficiencies is the other big driver.
Asset managers are currently trying to rationalise their reporting costs by rethinking the way they actually do reporting. This involves moving from internal reporting factory to a software-based solution driven by the desire to reduce costs. Further, additional difficulties exist on the horizon as volatile market conditions, which are set to continue, further increase the reporting burden faced by companies.
One only has to look at the fallout from the recent Archegos Capital saga. Volatility around the Viacom stock, underpinned by Total Return Swaps, is likely to bring increased scrutiny on filings from both the SEC and CFTC. As a result, investment managers shouldn’t think of this process simply through the lens of damage control. Instead, streamlining their internal regulatory processes now will increase efficiency, and facilitate potential future expansion.
All difficult scenarios have potential benefits. But if investment managers start reviewing their regulatory reporting processes now, they will be well prepared to reduce costs and increase efficiencies. To make an assessment on what constitutes efficient reporting, asset managers need to have a more complete offering than ever before.
This includes, adopting a more service-oriented approach. One that provides trustworthy, realtime positions, centralising all information into one central location in their client reporting. Having accurate and timely reporting may not solve all the headaches asset managers currently face.
But it does at least move the issue on from something that is endlessly debated, onto a tangible solution that allows asset managers to focus their efforts on expanding their services to investors, as opposed to being weighed down by heavy reporting administration.