Does Mathieu Maurier possess a crystal ball or some other method of divining the future?
The question posed itself over the weekend of March 4/5 when news broke of the surprise announcement of an £11 billion merger between Aberdeen Asset Management and Standard Life Investments. The likelihood of more such mergers taking place in 2017 had formed a core part of the discussion between the Global Head of Sales and Relationship Management for SGSS and AssetMan.Net in an exclusive conversation just 48 hours earlier.
"Cost pressures on market participants are intensifying and asset managers need to take a long, hard look at how they do business," he said. "We will see more mergers and acquisitions taking place in the asset management and insurance sectors. We have seen a small number in the past six months or so and rumours abound of other future deals."
"This creates potential opportunities for providers of custody, fund administration, fund accounting, collateral management and compliance services," he added. "Change creates what you might call moments of truth for large institutions, raising questions about their traditional operating model, and we see market consolidation as very much part of a trend. As part of the relentless quest to deliver higher alpha, institutional investors are querying whether the fees they pay are well spent. We have reached nothing less than a tipping point; asset managers need to outsource and turn their full attention to delivering alpha to investors."
The prediction for further M&A activity in asset management emerged from a wider discussion of what Mathieu Maurier and his colleagues at SGSS expect to be the most prominent themes for the rest of 2017 and beyond. Although the context of the post-financial crisis age remains unchanged, he sees a period of continuing evolution ahead in an environment characterized by a general feeling of optimism.
"Even though long-term interest rates are showing signs of starting to rise, providers remain under the same pressure constraints thanks to the background of low or even negative short-term interest and we have had to adjust our operational model to give them the help they need."
It is this realignment on both sides of the asset manager/service provider equation that Mathieu Maurier argues offers brighter prospects for both. "Competitition amongst global custodians on plain vanilla services has long been intense, but the extra additional services we have had to formulate to help clients cope with new regulations are now delivering much-needed additional fee and commission income."
In short, this revenue from services that did not previously exist is helping to rebalance the loss of interest income. He highlights the regulatory-driven need to clear over-the-counter derivatives through central counterparties and the associated collateral management activity as one niche that is beginning to grow momentum. "We are deleveraging the middle and back office," he says, highlighting the creation of I-Deal, a dealing desk outsourcing service for asset and investment managers, to offer the best execution service demanded by MiFID II (the second iteration of the European markets in financial instruments directive). This, he explains, has the add-on benefit of delivering analytics that clients find increasingly useful.
The long-running direction of travel up the value chain is another key element of the evolution that Mathieu Maurier forecasts. The basic elements of custody and fund accounting etc remain firmly at the heart of the offering of any credible global custodian. But the need to develop further services for alternative asset classes such as private equity and real estate, and private equity real estate, thereby enabling alternative investment managers to offer UCITS funds, is pressing.
Technology, of course, has a key role to play in the immediate and longer-term future. "I've spoken before about the rise of the robots, and make no apology for repeating myself. We are moving into areas where technology is essential if a service provider is to remain nimble and agile. For our part, we are setting up digital tooling to help firms automate functions that were previously manual and sources of avoidable operational risk."
An inescapable feature of this evolution is a subtle change in the role of custodians and other service providers, he concludes. "We are moving from being a provider of relatively simple traditional services and towards becoming a provider of higher value data services."
The future, it seems is bright. The future, however, is also nuanced.
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Does Mathieu Maurier possess a crystal ball or some other method of divining the future?
The question posed itself over the weekend of March 4/5 when news broke of the surprise announcement of an £11 billion merger between Aberdeen Asset Management and Standard Life Investments. The likelihood of more such mergers taking place in 2017 had formed a core part of the discussion between the Global Head of Sales and Relationship Management for SGSS and AssetMan.Net in an exclusive conversation just 48 hours earlier.
"Cost pressures on market participants are intensifying and asset managers need to take a long, hard look at how they do business," he said. "We will see more mergers and acquisitions taking place in the asset management and insurance sectors. We have seen a small number in the past six months or so and rumours abound of other future deals."
"This creates potential opportunities for providers of custody, fund administration, fund accounting, collateral management and compliance services," he added. "Change creates what you might call moments of truth for large institutions, raising questions about their traditional operating model, and we see market consolidation as very much part of a trend. As part of the relentless quest to deliver higher alpha, institutional investors are querying whether the fees they pay are well spent. We have reached nothing less than a tipping point; asset managers need to outsource and turn their full attention to delivering alpha to investors."
The prediction for further M&A activity in asset management emerged from a wider discussion of what Mathieu Maurier and his colleagues at SGSS expect to be the most prominent themes for the rest of 2017 and beyond. Although the context of the post-financial crisis age remains unchanged, he sees a period of continuing evolution ahead in an environment characterized by a general feeling of optimism.
"Even though long-term interest rates are showing signs of starting to rise, providers remain under the same pressure constraints thanks to the background of low or even negative short-term interest and we have had to adjust our operational model to give them the help they need."
It is this realignment on both sides of the asset manager/service provider equation that Mathieu Maurier argues offers brighter prospects for both. "Competitition amongst global custodians on plain vanilla services has long been intense, but the extra additional services we have had to formulate to help clients cope with new regulations are now delivering much-needed additional fee and commission income."
In short, this revenue from services that did not previously exist is helping to rebalance the loss of interest income. He highlights the regulatory-driven need to clear over-the-counter derivatives through central counterparties and the associated collateral management activity as one niche that is beginning to grow momentum. "We are deleveraging the middle and back office," he says, highlighting the creation of I-Deal, a dealing desk outsourcing service for asset and investment managers, to offer the best execution service demanded by MiFID II (the second iteration of the European markets in financial instruments directive). This, he explains, has the add-on benefit of delivering analytics that clients find increasingly useful.
The long-running direction of travel up the value chain is another key element of the evolution that Mathieu Maurier forecasts. The basic elements of custody and fund accounting etc remain firmly at the heart of the offering of any credible global custodian. But the need to develop further services for alternative asset classes such as private equity and real estate, and private equity real estate, thereby enabling alternative investment managers to offer UCITS funds, is pressing.
Technology, of course, has a key role to play in the immediate and longer-term future. "I've spoken before about the rise of the robots, and make no apology for repeating myself. We are moving into areas where technology is essential if a service provider is to remain nimble and agile. For our part, we are setting up digital tooling to help firms automate functions that were previously manual and sources of avoidable operational risk."
An inescapable feature of this evolution is a subtle change in the role of custodians and other service providers, he concludes. "We are moving from being a provider of relatively simple traditional services and towards becoming a provider of higher value data services."
The future, it seems is bright. The future, however, is also nuanced.
