DISCLAIMER: This post was last modified on 12 January 2024. Some information in this article may not be updated.

We continue to see the rapid evolution of the financial landscape this year. The preferences of investors and fund managers, as well as new requirements brought about by regulatory and tech trends this 2024, are constantly changing, posing unique challenges to them and their fund administrators. 

What is the next big thing in fund management this 2024? Here’s what Bolder team members think: 

The emergence of AI tools and strategies

According to Mustafa Qadir, Bolder Group’s Lead of Fund Solutions & Digital Assets, the financial services industry is poised for a disruptive change as clients require more personalised services that are secure, smarter, faster and delivered through modern channels.  

The industry has always aimed to provide more efficient and smarter client services. However, this is only possible now with scalable computing power and emerging technologies, such as robotic process automation (RPA), Machine Learning (ML) and Gen Al.

Mustafa Qadir (Lead of Fund Solutions & Digital Assets, Bolder Group)

The focus is shifting from generating large datasets to leveraging the existing data more intelligently and efficiently. The impact can already be seen in multiple areas, such as analytics, reporting, financial monitoring, risk management, customer communication and customer retention programs.  

Qadir also explained that the emergence of new AI tools and trends this 2024 and beyond brings a set of challenges to the funds market. For example, poor data management poses a significant risk, as organisations must set up guardrails to prevent data leaking through AI tools. “Understanding the cumulative value of AI and its impact on the organisation is important. Instead of general-purpose AI, there’s a move towards developing models for specific tasks—creating bespoke solutions to address particular needs more effectively,” the expert added. This includes using AI for specific purposes for personalised responses, for example:  

• Risk & Regulatory Compliance: With the help of AI & ML algorithms, vast amounts of data can be analysed to ensure compliance with regulations and identify any anomalies or potential violations. This helps financial institutions avoid penalties and reputational damage. 
• Asset Management: Gen Al can help optimise asset allocation and make investment decisions based on historical data and market trends. This can help financial institutions maximise returns and minimise risks. 
• Customer Service: ML-powered chatbots and virtual assistants are used in client touchpoints to provide customer support, answer inquiries and assist with basic transactions. This helps financial institutions reduce costs and improve customer experience by providing 24/7 support. 
• Market Trends: Financial institutions can identify trends and predict market movements by analysing news articles and social media posts.  

Qadir highlighted the power that AI has to transform the financial sector. Specifically, by leveraging ML algorithms, financial institutions can improve efficiency, reduce costs and enhance customer experience. As AI becomes more mainstream, we expect to see even more innovative applications in the financial sector.  

Quant funds on the rise  

Often referred to as “quant funds,” quantitative hedge funds are a subset of hedge funds that leverage their investment decisions on advanced statistical and mathematical models. Neco Dusseldorp, Bolder Group’s Global Head of Funds, shared that the introduction of mathematical pricing models for financial instruments laid the groundwork for quantitative approaches to investment management. The development and evolution of computers enabled the application of quantitative models to trading strategies. 

In the short history of quant funds, notable developments include the emergence of statistical arbitrage as a result of advancements in technology. “We saw a number of quant fund meltdowns during the financial crisis of 2007-2008. The quality of the algorithms and mathematical models proved to be imperative to the success of quant funds under all market conditions. During the last decade, we saw the introduction of machine learning and AI in quantitative trading models,” Dusseldorp stated.  

Regarding future developments and industry trends on quant funds, Dusseldorp explained that technological advancements this 2024 and beyond will reinforce quantitative models and increase their use in investment management. Market actors should keep an eye on AI, machine learning and quantum computing to keep up with the developments of quant models in investment management. 

Moreover, increased competition, tech ability and a push for operational efficiencies will provide a more technology-driven approach to executing investment strategies and increasing volumes.  

But what role will service provider play in approaching quant funds?  

According to Dusseldorp, a service provider can add value to a quant fund manager if it positions itself as a true outsourcing partner. “The rise of quant fund managers, in turn, causes operation challenges and opportunities for fund administrators. Having systems and data connectivity that can digest large volumes is a prerequisite.”

Next, a structured approach to service execution and a tested workflow management process will provide the structural framework. Understanding AI and machine learning and the ability and aptitude to keep up with industry trends, such as AI and machine learning both from a knowledge and a technological perspective, will allow the fund administrator to play a supportive role in the manager’s success in achieving their goals.

Neco Dusseldorp (Global Head of Funds, Bolder Group)

Increased ESG investing  

Over the past few years, environmental, social and governance (ESG) investing has become highly prevalent in the financial world. According to a Morningstar report, almost 70 per cent of asset owners consider that ESG factors have become more significant in the last five years.  

Growing demand for ESG-focused investments 

Investors are looking for ESG-relevant opportunities with their values; they are particularly interested in businesses and companies with a positive impact on society and the environment. In 2024, such investors will fuel the growth of ESG.  

According to Ana Prada, Bolder Group’s ESG Specialist, the EU Taxonomy and Sustainable Finance Directive further accelerated the discussion about taxonomies all over the world and countries are developing legislation focusing on sustainable financial products, e.g., Singapore, Hong Kong, South Africa and the United Arab Emirates.  

“Other countries are encouraging investment in green energy funds, such as Chile, Canada and the US. Also, financial authorities are starting to monitor the performance of financial market participants on ESG issues. Not to mention that financial rating agencies are becoming more involved in this area as many investors demand more information. And not only investors, but all financial market participants are becoming increasingly aware of the legal and reputational risks of taking ESG issues into account,” she added.  

Integrating ESG considerations into the investment process 

Integrating ESG into the investment process presents challenges, particularly in terms of increased regulation and control. As a result, many companies must hire in-house professionals to manage these regulations and requirements. Prada highlights that all regulators look for transparency to avoid greenwashing.  

She also mentioned that one of the big challenges is the double materiality analysis of these aspects according to EU regulations. This includes how businesses impact employees, communities and the environment with their activities. 

Measuring and reporting on ESG performance 

You have to be transparent and report your risks and advantages on these topics, always considering that misinformation can lead you to greenwashing. You will be in the public eye and can be involved in judicial claims for this.

Ana Prada (ESG Specialist, Bolder Group)

One of the biggest ESG-related challenges that companies face is data collection; both companies and regulators still need to work on a standard process to obtain, analyse and measure ESG information. For example, the EU is working on a reporting standard. More companies are expected to design ESG platforms aligned with current and future regulations.  

Technology, thanks to its data collection capability, also plays a significant role in measuring and reporting ESG performance. Due to the volume of information to collect, evaluate and report EGS KPIs under the current legislation, tech platforms prove to be beneficial in executing these activities.  

To learn more about the ESG trends in 2024, read here: https://boldergroup.com/insights/esg-trends-2024/  

Expanding compliance regulations  

Compliance in financial institutions is receiving more attention due to the constantly shifting regulatory requirements. Market trends, geopolitical events and technological developments prompt these changes. 

Increasing regulatory oversight of alternative asset classes  

For Bolder’s Interim Global Head of Compliance, Adrian Mubangizi, regulatory oversight for both traditional and alternative assets is often driven by four key principles—Market Transparency, Investor Protection, Financial Reporting and Anti-Money Laundering/Know Your Customer. Regulations covering these four aspects have been steadily increasing year on year. There are various reasons for increased regulation and oversight, but what we consider to be the four major drivers in 2024 will be (a) technological advancements, (b) global economic shifts, (c) past financial scandals or failures and (d) international regulatory alignment.  

Emerging crypto assets regulations 

There are emerging regulations for cryptocurrency assets that are affecting fund management. These regulations include compliance costs and complexity, product offerings and investment strategies, investor protection and trust, market stability and risk management, and global coordination and arbitration, as mentioned by Mubangizi.  

• Compliance Costs and Complexity – More defined and widespread crypto regulations can lead to higher compliance costs as funds need to be invested in legal expertise, compliance infrastructure, and ongoing monitoring to ensure they adhere to these new rules.  
• Product Offerings and Investment Strategies – Emerging regulations might limit or expand the range of cryptocurrency-related products fund managers can offer. They could impose restrictions on the types of crypto assets that can be included in portfolios, or they might require certain risk management practices to be in place.  
• Investor Protection and Trust – As regulations for cryptocurrencies become more robust, they might increase investor confidence in these assets, thereby potentially broadening the investor base for crypto funds.  
• Market Stability and Risk Management – Regulations may require fund managers to adopt stricter risk management practices when dealing with cryptocurrencies, given their volatility and the risks associated with custody and security.  
• Global Coordination and Arbitrage – Fund managers operating internationally need to comply with regulations that might differ widely between countries where their funds are marketed or held. This scenario can lead to regulatory arbitrage, where funds choose jurisdictions with more favourable regulations, but it can also be costly and may complicate efforts to offer a global fund product. 

“The impact of these emerging regulations will depend on the balance between fostering innovation and growth in the cryptocurrency sector and ensuring a stable, transparent and fair market environment,” Mubangizi explained.  

The impact of regulations on investment strategies and risk management  

With the emergence of compliance regulations, the impacts on investment strategies and risk management will follow, such as enhanced due diligence and transparency, stricter risk management protocols and increased focus on compliance and legal expertise.  

Developing robust compliance practices  

Demonstrating strong compliance practices is crucial for fund managers to avoid regulatory penalties and build trust with investors and stakeholders. Adrian listed four opportunities for fund managers to showcase their commitment to compliance:  

• Transparent Reporting and Communication – Fund managers can use reporting as an opportunity to demonstrate compliance. By going beyond the minimum regulatory requirements and providing clear, comprehensive, and user-friendly reports, they can show their dedication to transparency.  
• Adopting Advanced Technology for Compliance Monitoring – Utilising the latest technology for compliance monitoring and risk management can showcase a fund’s commitment to maintaining the highest standards.  
• Training and Development Programs – Fund managers can create and implement comprehensive training programs for their staff to ensure everyone understands and adheres to regulatory requirements and ethical standards.  
• Third-Party Audits and Certifications – Engaging with reputable third-party auditors to conduct regular and thorough reviews of compliance procedures can provide an objective assessment of a fund’s practices.  

To read more about the trends in compliance this 2024 and what our experts think: https://boldergroup.com/insights/bolder-insights-trends-in-compliance-this-2024/

Bolder funds solutions

This year, the trends mentioned above will significantly impact how individuals and businesses manage their finances. Future financial success will depend on your ability to stay informed and adapt to these changes. 

Our team of experts at Bolder is client-focused and well-versed in fund administration and compliance, with cutting-edge technology at the core of our service offering. With our comprehensive global fund administration services, you can concentrate on asset management and perform your primary responsibilities to maximise your business as we relieve you of the middle- and back-office duties.  

Ready to discuss your fund management needs and investment goals this 2024? Contact our team today. 

Bolder Group does not provide financial, tax or legal advice and the information contained herein is meant for general information purposes only. We strongly recommend that before acting on any of the information contained herein, readers should consult with their professional advisers. The Bolder Group accepts no liability for any errors or omissions in the information, or the consequences resulting from any action taken by a reader based on the information provided herein.

Bolder Group refers to the global network of independent subsidiaries of Bolder Group Holding BV. Bolder Group Holding BV provides no client services. Such services are provided solely by the independent companies within the Bolder Group which are each legally distinct and separate entities and have no authority (actual, apparent, implied or otherwise) to obligate or bind Bolder Group Holding BV in any manner whatsoever. The operations of the Bolder Group are conducted independently and have no affiliation with third party financial, tax or legal advisory firms or corporations.