The product lifecycle is a complicated process for fund managers at the best of times, made harder by margin pressure and intense competition.
Fund managers must be quick to market to carve out bigger market shares. Legacy systems and outdated manual processes are an impediment that entail costly mistakes, delayed product launches and errors that cause reputational damage.
These challenges are symptomatic of a larger problem, which is efficient use of data. Legacy of IT architecture built upon business processes and flow requirements with core systems and add-on applications across multiple interfaces to join the dots is very often not embedded in any logical data set-up.
“Firms want to be able to differentiate themselves from their competitors by possessing data insights around structure and unstructured data, interpreting how it can be used in their organisation and apply it to where it can add value and growth to overall plan,” says Jeffrey Nadal, MD and CCO at Fundsquare. “The repercussions of inefficiently used data affect all areas of the investment process, distribution and product teams. In turn, this negatively impacts investment decisions, performance, onboarding of new clients, growth of AUM and overall business.
”Adding to these challenges, is the increasing amounts of regulation across the industry, which make fund registration across different jurisdictions an even more complicated task. “Fund managers have to ensure they are compliant with a multitude of local regulations,” adds Maxime Aerts, Managing Director and Chief Operating Officer at Fundsquare.
Fund disclosure requirements are a must-have item in the sales division agenda. A tsunami of regulatory changes has swept the industry in the past two years, including the new Securities Financing Transaction Regulation, MiFID II and the European Market Infrastructure Regulation, both updated to reflect changing market conditions and increased investor protection.
Sustainable, or ESG, funds are no longer niche but mainstream. These funds have gained significant traction since the pandemic and are positioned to increase their share of total European assets from 15% to 57% by 2025; the bulk of growth coming from conversions of non-ESG funds into funds compliant with new regulations.
“Extra disclosure requirements are an opportunity, but also a challenge for product manufacturers. Many believe that the essential journey towards further transparency is limitless,” adds Julien Renkin, Director of Product Management & Client Solutions at Fundsquare. This year the demand for data will increase with the EU Sustainable Finance Disclosure Regulation (SFDR), which will require asset managers to incorporate sustainability risks across their investment processes, product governance and internal systems as a response to this market trend.
The right data in the right place at the right time
To respond to this changing framework and evolving market conditions while maintaining their focus on their core business, fund managers need a flexible yet resilient operational infrastructure to effectively extract, collect, analyse, and distribute data to meet the moving parts of the product lifecycle. The ideal is access to a single platform where asset managers and stakeholders have the information at their fingertips. Revamping or building a new system internally is an expensive proposition, especially when time and money would be better deployed focusing on alpha generation for end investors.
Managing Director and COO (Fundsquare)
Our focus is to streamline the orchestration of data that fund managers have and offer real-time digitalised solutions.
Ease the burden
“Fundsquare, the main data hub for Luxembourg domiciled funds, has been facilitating accurate, secure and timely cross-border fund distribution since 1997,” says Aerts.
“We can work with asset managers to ease the burden. Our focus is to streamline the orchestration of data that fund managers have and offer real-time digitalised solutions across the product lifecycle, from inception to filing, so that they can get their products to market in a timely fashion. We want to help them join the dots with their growth plans and ambitions. Their focus should be on how they are differentiating themselves.
”The aim is to improve the disclosure management experience for investors and fund managers alike and offer end-to-end transparency and control over the data lifecycle. The information flows can be monitored so that managers know who received what and when. The advantage of a single platform ensures that a fund product meets the highest levels of compliance.
Renkin adds: “All information is delivered to the relevant authorities, intermediaries and investors accurately and efficiently.”
Managing Director and CCO (Fundsquare)
We have entered into strategic alliances with fintech and AI companies whose service offerings will foster more options for clients.
Costs & Value Creation
Data management including costs tied to eventual oversight has become expensive. It is only through efficient management that data is cost-effective. The market is currently undergoing a consolidation wherein we see smaller groups of dominant data-focused players. This may translate into less competition for some, however, demands higher levels of new service offerings.
As technology moves to the cloud and API-type architecture, most vendors are using different platforms to distribute their data. Two major choices are present: the enterprise model, where data is managed through a front-end application, or an API-type platform where raw data is acquired through a technological solution.
Nadal talks about the “fintech disruptors” entering the market across the entire value chain. These disruptors can now provide new data such as ESG or data metrics for which access was previously impossible, including the source data. “They offer real solutions to real problems and not just a mechanism for simple transit of data.”
“At Fundsquare, we have entered into strategic alliances with both fintech and AI companies whose service offerings will foster additional agility in our market response and more options for clients who seek an increase in their value proposition,” adds Nadal.
Recent alliances with Kurtosys and Tetrao are part of an overall business strategy that Fundsquare considers essential if we want to maximise on the creation of true value. “These services are being offered as a package or on a component basis. Flexibility is the key word,” says Aerts.
In partnership with Kurtosys, the digital fund distribution cloud for asset management, Fundsquare will offer the technical integration of a dissemination platform combined with the scope and framework of Kurtosys’ end-to-end, secure digital experience platform. The value translates into a streamlined data integration process for clients, greater flexibility for sales teams, automated sales materials, and the possibility to create an ESG reporting portal for institutional investors.
Luxembourg-based Tetrao is all about artificial intelligence. Tetrao has developed capabilities to collect daily documents and relevant metadata on 85,000 instruments of the fund industry through use of AI. Coupled with Fundsquare’s market structure, this alliance will enlarge the scope of data available and create new features and services which will positively impact economies of scale for the market players/fund managers.
“In a world of digitalisation, we have found that a multitude of new options exists in the value creation chain. It is up to prominent players like us to decide how we want to add value and bring clarity to the product management lifecycle” adds Nadal.
Funds Europe, March 2021