Forefront Communications

Asset Servicing Times: Costs and Regulations Spur Managers to Overhaul Operations

Alexandra Hamer

Alexandra Hamer

Gary Casagrande of Confluence explains why asset managers around the world are moving to reshape their operations amid unprecedented cost pressures and a constantly evolving regulatory environment.

He writes: “For buy-side firms, last year was an unmitigated challenge. It was a year marked by sustained margin pressures and compounded by steadily rising compliance costs from regulatory changes across multiple countries. Dealing with a variety of regulations is one thing, but it’s quite another thing—and more expensive—when regulations cut across different jurisdictions. With the world getting smaller and investment markets becoming increasingly intertwined, the cost of compliance has become a growing burden for asset managers. But for many of these firms, it’s the industry trend toward low-fee or even zero-cost passive funds that have hit their margins the hardest. Last year, Fidelity Investments became the first fund company to offer zero-cost index funds and in March this year, J.P. Morgan announced that it was launching the lowest-fee exchange-traded fund (ETF) on the US market. Fidelity’s loss-leader product and J.P. Morgan’s ETF, which is one basis point lower than similar offerings from BlackRock and Charles Schwab, represent a continuation of the trend to fight for shareholder assets using fees as a differentiator.”

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