In just under two months’ time, the UK’s membership of the EU is poised to expire. If the current political sentiment is anything to go by, the UK looks set to leave the EU without a comprehensive deal in place. While this will undoubtedly cause widespread disruption, the funds’ industry is in a less precarious position than many other sectors. Both the UK’s Financial Conduct Authority (FCA) and the European Securities and Markets Authority (ESMA) have concluded reciprocity agreements which should facilitate a degree of stability and continuity for asset managers selling investment products on both sides of the Channel. While…

Reform of the $595 trillion OTC derivatives market has been a regulatory priority ever since the financial crisis. While strong progress has been made towards transitioning vanilla OTC products into centralised clearing, a lot of contracts – either because their underlying properties do not align with CCPs’ exceptionally strict risk criterion or they are just too complicated – are still traded bilaterally between counterparties. Regulators concede these bilateral OTC trades are a systemic risk, but there are growing concerns – at least from the buy-side – about the regulatory treatment being levelled on some of these uncleared OTCs. Six years ago,…

In 2016, a handful of well-known UK-based open ended property funds invested in UK commercial real estate were forced to implement redemption gates after Brexit, as it became clear that their assets could not be realised quickly enough to satisfy the flurry of client redemption requests. In this instance, gating was necessary and effective, as it prevented further market turmoil, a point made by the UK’s Financial Conduct Authority (FCA) at the time. What unfolded in June 2019 at Woodford Investment Management’s Equity Income Fund has not elicited as sympathetic a response from the market, however. UCITS: A trusted brand under…

Depleting returns interlaced with excessively crowded trading conditions have forced asset managers to contemplate alternative approaches towards generating better performance for clients. By systematically integrating bottom-up, in-depth data – often supplied by external technology providers or bank counterparties – and then leveraging AI to conduct deeper analysis of securities, sectors or markets is one way fund managers could suppress the post-crisis downward return spiral, and revert to profitability. Or at least that is theory. The reality is more ambiguous. Not only are genuine doubts being flagged about the actual reliability of data (i.e. its authenticity in the context of unchecked fake…

In the aftermath of the financial crisis, many asset managers saw M&A with their competitors as a means to survival, principally a necessary evil by which to preserve their businesses amid the tumbling markets and as a counterweight to offset the sheer volume of client redemptions. Since then, M&A activity at asset managers has grown progressively year-on-year. According to data compiled by Sandler O’Neill, a US investment bank, there were 255 recorded deals in 2018, involving $3.71 trillion in AuM (assets under management), up from 210 and $2.88 trillion respectively in 2017.[1] This trend is not decelerating, and it is…