Global Fund Administration Services: Key Trends
The global fund administration services industry was worth at least $8 to $12 billion as of August 2021. The market plays a significant role in keeping the funds and related information in order, as well as regulatory and legal obligations. Not only do fund administrators offer accounting or reporting services, but also compliance, reporting and directorship solutions, amongst others.
For fund managers and asset managers, it can be challenging to run in-house middle-office and back-office operations, which is why they partner up with third-party providers of fund administration services (whether those that offer local or global solutions). This way, the managers can focus more on their portfolio and less on the paperwork and compliance matters.
As we are halfway through 2022, let’s see the key trends that have been shaping the global fund administration service industry.
One: rapid digitalisation of the global fund administration service industry
Looking back, the world had already been prepping for massive digitalisation from across industries. However, the process was sped up as a necessary response to keep businesses and operations running amidst lockdown orders at the height of the Covid-19 pandemic. The industry of global fund administration service is no exception, especially as most professionals were left with no choice but to work remotely.
A recent study commissioned by Funds-Europe found that 54 per cent of fund administrators globally understand that legacy technology is a challenge for the industry. 38 per cent of the same respondents said their company will highlight digital transformation to keep up with the demands of asset managers and other clients.
A fundamental shift in the digital capacity of fund administrators will be crucial in ensuring real-time accessibility, transparency, and security of their clients’ data, activities, investments, portfolios and even trading, to name a few – especially because of huge volumes of data. For providers of global fund administration services, investing in digital transformation is a necessity to survive and thrive.
Moving forward, widespread digitalisation will reduce – or even completely remove – manual labour processes in the middle and back offices, eliminating human errors. Importantly, digitalisation has changed the way compliance is done. For example, it has strengthened remote KYC processes by investing in advanced forensic tech.
Bolder Group’s global fund administration services are in line with the latest technological developments and innovations. We understand the importance of data and easy yet secured access to this. We partnered with some of the most trusted software developers for our fund administration solutions.
Bolder Group also has an in-house team of tech experts who are adept at the latest digital requirements of global fund administration services and are sensitive to our clients’ needs. To know more about the Bolder Group technology, click this link.
Two: The continuous rise of impact-focused investments and funds
ESG is a prominent keyword in the financial landscape. With Elon Musk defining ESG ratings as merely a ‘scam’ and investors and consumers generally preferring impact-focused services and products – ESG seems to be the rave these days. Plus, the Covid-19 pandemic has magnified the need for sustainability and other ESG factors.
But how does it impact global financial services? Like consumers, investors have started to look for partners (fund managers and fund administrators) that execute ESG efforts themselves or, at least, have ESG-related policies in place within their organisation or processes.
More and more organisations have been keenly tracking business entities that are either ESG-compliant or non-compliant; the most prominent are the S&P 500 DJI and Bloomberg Scores.
However, data gaps in ESG reporting must be addressed to ensure complete and accurate reports.
In the first quarter of 2021, the European Union enforced the Sustainable Finance Disclosure Regulation or SFDR, which aims to increase transparency within the financial market in terms of investment ESG risks and opportunities. ‘Amendments and additions to the legislation require financial entities to comply with the SFDR and provide penalties for non-compliance’, according to Bolder Group (Read more here.)
Regulations like the SFDR would mean additional reporting requirements for organisations.
Three: Emphasis on emerging markets and alternative investments
In the past decade, investors and fund managers have shown a steady, if not increasing, interest in alternative investment funds. Historically, only UHNWI and accredited investors bet on AIFs, but after the 2008 recession, investors have grown wiser and looked at alternatives to diversify their portfolios, whilst spreading out risks and enjoying potentially higher returns. Following the 2008 recession, investors became much more into passive rather than active investments, according to the Harvard Business School.
According to industry data tracker Preqin, in 2008, there were about 3,500 investors capitalising on AIFs; in 2018, there were 11,000. In that same year, the result of a Prequin survey showed that 84 per cent of investors plan to commit more capital to alternative assets over the next five years (up until 2023). The tracker forecast from 2020 to 2025 the AIFs sector will see a compounded annual growth rate of 9.8 per cent. By 2026, AIFs under management is expected to be valued at $17.2 trillion.
Higher demand for AIFs mainly drives the growth; each asset class, however, tells a different story.
Despite the recent breakdowns, cryptocurrency is still a rockstar alternative asset class. In 2021, there were 300 million crypto investors; a third of that figure is from emerging market India.
On the other hand, real estate is not so hot. With the Covid-19 pandemic forcing the world to shift radically to the digital space, there was a decline in commercial real estate demand. Experts do not expect previous demand for office spaces to return, as the world has been introduced to permanent hybrid or remote work setups. Nevertheless, things are looking up for the industrial real estate sector, fueled mainly by the rise of e-commerce.
There are also emerging AIF markets. Investors are looking outside North America and Europe. Fund managers have been paying close attention to investment opportunities in Southeast Asia, China, India and Brazil.
As a global fund administration service provider, our business development professionals continuously look for ‘new new’ businesses, that is, emerging markets that are yet to be tapped. Additionally, Bolder Launch – a subsidiary of Bolder Group – focuses on assisting businesses entering foreign markets or expanding there.
The colossal shifts in the global economy, principally due to the Covid-19 pandemic, will directly affect the way global fund administration services are demanded and delivered. Bolder Group keeps up with the changes, to make sure our clients do too. We provide fund administration services on a global level. With thirteen locations all over the world, our Bolder team can help private and corporate clients, asset and fund managers in terms of fund administration, governance and compliance solutions and secretarial support.
For more information about our full range of services, contact us or visit the nearest Bolder office.