Written by: Katherine Damsell | Segment Executive–EMEA Investment Managers, BNY Mellon
Rarely can a FundForum conference have taken place against such a backdrop of change and uncertainty. Profound political, economic and social shifts are reshaping the investment landscape, many driven or facilitated by technology innovations so powerful as to have been collectively dubbed ‘the fourth industrial revolution’ by World Economic Forum executive chairman Klaus Schwab. The interaction of these forces will continue to generate further instability and uncertainty in the future, with implications for ‘what’ and ‘how’ investment managers deliver to clients. The recent period of low growth has dried up returns, spurring popularity of both passive vehicles and alternative strategies, with fintech innovation piling further margin pressure on incumbents, but also offering opportunities to create greater value, for example through advances in data analysis, artificial intelligence and digitisation of services and workflows. Many of these developments are potentially positive and exciting. But the precise direction of travel is clouded by the sheer scale and range of disruptive forces; from the rising tide of protectionism and shifts in geo-political alliances to the unintended consequences of far-reaching regulatory reform.
In such times, it is particularly important to keep options – and ears – open, through regular engagement with peers and customers, including at industry events like FundForum. As investment managers work to strengthen close relationships with distributors and clients, they must also ensure their business models and operating infrastructures maintain the flexibility needed to accommodate the unexpected.
Of course, responding to changes in investor demand is increasingly a collective effort, requiring input from across the supply chain including partners such as banks, vendors and market structures. Growing European demand for exchange-traded funds, for example, is being facilitated by the efforts of central securities depositories and custodian banks to deepen liquidity. Similarly, strong investor appetite for private debt funds is forcing providers to scale up their back-office capabilities, often via outsourcing. Meanwhile mutual fund providers are revisiting their partnerships and presence across Europe, not only in light of MiFID II’s inducement regime, but also the challenges and opportunities that may result from the UK’s planned departure from the European Union.
As mentioned above, technology innovation plays a key role in helping investment managers to meet shifting customer expectations, potentially delivering more tailored, transparent and flexible products and solutions in a more user-friendly and cost-effective manner. Again, turning potential into reality is an increasingly multilateral enterprise, as the industry moves to more collaborative service models. BNY Mellon’s NEXEN platform, for example, leverages technologies such as cloud, open source and APIs to enable investment management clients to access both proprietary and third-party solutions from established vendors and innovative fintechs on a more flexible, efficient and responsive basis. Through NEXEN and our global network of innovation centres, BNY Mellon is working with investment managers to offer improved data management and analytics that will support faster, evidence-based decision-making.
The uncertainties facing the industry may be great, but our confidence in the ability of investment managers and their partners to respond has been confirmed this week in Berlin. Conversations and presentations throughout the week have reflected the resolve of the investment community to meet challenges and grasp opportunities to improve investor outcomes and deliver client excellence. In more than 200 years of history, including more than 50 years in Europe, BNY Mellon has seen shifts in regulation, customer demand and technology. That history has taught us the value of strategic commitment, operational stability and a firm understanding of the regulatory framework in support of clients’ evolving needs. Let’s face the future together.