Clement Miglietti, Chief Product Officer, NeoXam.
It is hard to think of another issue that has been deliberated over more in recent times than the need for accurate reporting. The issue is, as 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 scrutinizing performance daily and imminent new regulations demanding more reporting, there has never been a more pressing need for asset managers to overcome their client and regulatory reporting challenges.
Impending regulatory changes worldwide, including changes to PRIIPS, MIFIR, SFDR and AIFMD, ask for increased transparency around costs, risk and performance, liquidity, and now sustainability objectives. All this reinforces the necessity of having in-depth reporting around investments. But regulation is by no means the only driver of an increased focus on reporting. There is clearly a realization that service matters when it comes to creating value for investors. Both passive and active managers are trying to broaden the range of 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 becoming tech companies with a view to retaining and winning more business – BlackRock’s Aladdin platform is a prime example of this. In addition to expanding services and managing new regulatory pressures, asset managers are seeking operational efficiencies.
They are also trying to rationalize reporting costs by rethinking how they handle the process. This involves moving from an internal reporting factory to a software-based solution. Further, additional difficulties exist on the horizon as volatile market conditions increase the reporting burden. 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 increase scrutiny of filings by both the SEC and CFTC. Investment managers should not look at reporting through the lens of damage control. Instead, streamlining internal regulatory processes will increase efficiency and facilitate potential future expansion.
All difficult scenarios have potential benefits. If investment managers start reviewing their regulatory reporting processes now, they will be well placed to reduce costs and increase efficiencies. In order 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 that provides trustworthy, real-time positions, centralizing all information into one central location for client reporting. Having accurate and timely reporting may not solve all the headaches asset managers face, but it does at least move the issue on from something that is endlessly debated to a tangible solution that allows asset managers to focus their efforts on expanding services to investors, as opposed to being weighed down by heavy reporting administration.