New global regulations and volatile market liquidity are prompting more than half (56 per cent) of asset managers and asset owners to increase their technology and operational capabilities over the next year to manage financial and other data to meet regulatory compliance deadlines.
A global survey of 300 asset managers and asset owners, commissioned by State Street, shows that despite compliance deadlines being a year away, many fund managers have begun taking the steps needed to be compliant in a complex rapidly-changing regulatory environment.
In the US, the SEC delivered major rule-making results after extensive engagement and debate with the industry and modernised its standards for data collection, reporting, and disclosure practices. Fund complexes with over USD1 billion in net assets must file new regulatory reports beginning June 2018 and each open-end fund (other than in-kind ETFs and money market funds) must establish and administer written liquidity risk programs with oversight by their boards that, among other things, classify each investment holding of the fund into categories based on settlement periods and limits a fund’s holdings in illiquid assets to no more than 15 per cent.
“Across the globe, regulations are increasingly focused on data transparency, portfolio holdings, valuations and liquidity, as well as increased reporting to both investors and regulators,” says Brenda Lyons (pictured), executive vice president and head of the specialised products division for State Street Corporation. “Consistent with this, in the US, the new SEC rules are focusing on monitoring, managing and reporting a broad spectrum of data. Fund management and boards have been actively evaluating and planning for how to best address these regulations within their operations to achieve compliance by the specified date.”
The findings from “Let’s Talk Liquidity: Opportunities in a New Market Environment,” a recent research report from State Street, reveals that 42 per cent of institutions are concerned about their ability to meet liquidity compliance rules and provide accurate liquidity status reports to external regulators, in addition to their own management boards. Additionally, 47 per cent intend to rely more on external partners to improve their performance in this area, as nearly one in five institutions feel their reporting and workflow solutions for their regulatory jurisdictions are not developed enough.
