So, how does the buy-side trader contend with changing regulations?
Use advanced technologies, of course.
According to Linedatas eighth global asset management survey, the technology firm found that there is a shifting focus away from regulation as companies prepare for a new wave of demands and opportunities afforded by disruptive technologies.
In recent years, adapting to new regulation was considered one of the main challenges for over half of respondents (51% in 2017 and 52% in 2016), but in the 2018 survey this has dropped to just over a third (37%), with cutting costs (37%), attracting new client assets (29%), managing data (23%) and managing risk (21%) now cited as asset managers other key concerns.
New intermediation models, including robo advisors, are considered the biggest potential disruptor to the asset management industry over the next five years according to 22% of respondents (rising from 12% in 2017). This was followed by ETFs, which 20% of respondents forecast as a significant disruptor, blockchain technology (16%) and machine learning and artificial intelligence (12%).
Cybersecurity remains one of the top three challenges facing asset management firms right now according to aquarter (25%) of respondents, following high profile breaches of last year.
Sophie Fvrier, Co-Head of Asset Management and Innovation Director at Linedata, said: Now that the regulatory dust has settled asset managers are looking to future growth and the challenges and the opportunities offered by emerging disruptive technologies. The years ahead will bring exciting change as conceptual testing leads to implementation in areas such as robotic process automation and artificial intelligence tools.
Financial institutions increasing interest in cryptocurrencies is reflected in the survey, identified by 20% of respondents as one of the strongest candidates for growth over the next 12 months as groups continue to explore new investment opportunities. This was marginally below private equity investment (25%), and in line with smart beta (20%), both expected to grow alongside traditional asset classes such as fixed income as asset managers diversify and the boundaries between traditional and alternative managers become increasingly blurred.
MiFID II remains the regulation with the greatest business impact according to 52% of respondents, due to trade and transaction reporting and product governance requirements. Implemented on 25th May 2018, GDPR (General Data Protection Regulation) emerges in second place (38%), as controllers and processors of data grapple with the mechanisms required to ensure compliant processing and management.
Arnaud Allmang, Co-Head of Asset Management at Linedata, adds: The 2018 survey results show a sector embarking on a transformation process to succeed and grow. The emergence of big data and analytics allows asset management firms to enhance the efficiency of their decision-making process, and to provide products and services to clients, which can distinguish them from the crowd. Since 2017, Linedata has been evolving its strategy to better support the growth desired by asset managers, and is ow able to provide a combined offering of services & software incorporating cutting edge technologies.