About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

A Quiet Revolution: Changing Attitudes to Oversight and Contingent NAV Capabilities

Subscribe to our newsletter

The legal and regulatory landscape for the asset management industry has transformed over the past decade – with major upgrades such as AIFMD, FATCA, CRS and BEPs, in addition to a myriad of local compliance requirements. As the reporting demands of both investors and regulators grow, so too does the need for specialist knowledge, processes and technology – making third party fund administration an ever more popular option.

But with so many firms now outsourcing their fund administration operations, including the essential NAV calculations, regulators are increasingly upping the pressure on how asset managers monitor and oversee their outsourcing providers. As a result, global asset managers are increasingly acting to adopt resilient oversight and contingent NAV solutions, according to new research published this week by institutional fintech firm Milestone Group.

Over the past year there has been a significant increase in emphasis on oversight according to the firm’s ‘Outsourcing and Oversight Report 2019,’ with 100% of asset managers surveyed across North America and Europe now undertaking some form of oversight – a significant jump up from 65% recorded in 2014.

During the period, it seems some high-profile cases of service provider outages have instigated an air of additional caution, with 87% of respondents pointing to avoidance of reputational damage as the primary driver for oversight. In parallel with this, regulators are raising the bar for demonstrating best practice with most firms expressing awareness of increasing regulatory scrutiny. And this looks set to continue, with most firms expecting more regulatory focus on oversight over the next five years, and 52% also expecting a similar increase in focus on contingent NAV capabilities.

The survey identified a material increase in concern over cyber-risk with 30% of respondents indicating it is a motivating factor in considering contingent NAV arrangements, which was not a consideration five years ago. However, it also raised some questions. For example, there is a high level of recognition among fund managers that automation is integral to achieving efficient and resilient fund oversight, but manual spreadsheets are still utilized as part of the oversight function by over 50% of respondents.

Similarly, while nearly all respondents felt that independence of the oversight function from their service provider infrastructure is important, service provider reports and portals, which do not generally qualify as independent, continue to play a significant role in current oversight practices for almost three quarters (73%) of respondents.

“It’s clear the industry is becoming aware of the nuances relating to operational risks that modern oversight and contingent NAV capabilities can mitigate, but there remains a way to go to for the industry to fully embrace resilient systems,” concludes Milestone Group CEO Paul Roberts. “While there are relatively few headline-grabbing errors, practitioners know that outages happen more frequently than most realize. Many funds remain unprepared for a complete multi-day outage.”

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Detecting and preventing market abuse

Market abuse – unlawful disclosure of inside information, insider trading, circular trading, “pump and dump” schemes, etc. – poses significant threats to the integrity of capital markets. In 2024, global trading house Trafigura agreed to pay a $55 million fine to the U.S. Commodity Futures Trading Commission (CFTC) for trading with non-public information, manipulating a...

BLOG

Fenergo 2024 KYC Survey Highlights Institutional Investor Churn and Compliance Costs

The cost of inefficiency in Know Your Customer (KYC) processes goes far beyond regulatory penalties. According to the Global KYC Trends in 2024 for Asset Management report by CLM platform provider Fenergo, 74% of asset managers surveyed reported losing investors due to slow, complex, and disjointed onboarding processes. These losses are not just missed opportunities—they...

EVENT

ESG Data & Tech Briefing London

The ESG Data & Tech Briefing will explore challenges around assembling and evaluating ESG data for reporting and the impact of regulatory measures and industry collaboration on transparency and standardisation efforts. Expert speakers will address how the evolving market infrastructure is developing and the role of new technologies and alternative data in improving insight and filling data gaps.

GUIDE

AI in Capital Markets: Practical Insight for a Transforming Industry – Free Handbook

AI is no longer on the horizon – it’s embedded in the infrastructure of modern capital markets. But separating real impact from inflated promises requires a grounded, practical understanding. The AI in Capital Markets Handbook 2025 provides exactly that. Designed for data-driven professionals across the trade life-cycle, compliance, infrastructure, and strategy, this handbook goes beyond...