Despite low markets, high geopolitical risks and ongoing Brexit issues, the global funds industry continues to thrive, and there are a number of current and emerging trends expected for 2019 and beyond:
Regulatory Technology (RegTech) rapidly rose to prominence in 2015 following the growing regulatory burden placed on the funds industry. Old, XL-based systems are no longer reliable enough to effectively monitor risk. As such, RegTech solutions are being implemented to enable hedge funds and administrators to meet regulatory requirements more efficiently.
Over the last five years, more than $9.5 billion has been invested in RegTech companies globally. Not only is RegTech technology being used to automate time-consuming and laborious processes, but it is also being used to apply Artificial Intelligence and Machine Learning tools to data derived from onboarding. The challenge for 2019 and beyond is for the global funds industry to capitalise on this emerging technology.
2. More Demand for Data Analytics and Data Science
Data analytics and data science are in great demand, particularly within the field of proprietary investment research. Private equity funds, venture capital firms, hedge funds, investment banks and consumer finance companies are all using investment research to analyse data and discover trends.
Investment research is a highly competitive field where gaining any sort of edge can make a huge difference. It enables fund companies to gain a strong sense of market need, understand consumer pain points, determine the latest trends, get a pulse on the market and track consumer sentiment.
3. Enhanced Transparency and Investor Protection
Another trend for 2019 has been demand amongst investors for greater transparency and measures designed to protect their interests. Heavily regulated funds are growing in popularity among investors, and there is rising demand for greater accountability. While all European funds are heavily regulated by European legislation and the Central Bank, it is not yet clear how Brexit will impact UK financial services legislation and its funds industry.
4. Increase in Nearshoring
With offshoring costs on the rise, many fund companies are beginning to consider the virtues of nearshoring. With similar time zones, lower costs, fewer language barriers and qualified developers, nearshoring is becoming progressively more prevalent.
5. Increased Costs
Increased transparency, protection and regulation have inevitably led to increased costs. And while investors welcome these enhancements, they are also investing to make a profit, and increasing costs impact returns. As such, it’s important that a fund manager’s interests are aligned with those of the investor, and that investors do their research to fully understand the fees in place before they commit.
6. Growing Number of Socially Aware Funds
In recent years, investors have become more conscious of the social and environmental consequences of the decisions of governments and companies. The result has been greater demand for integrating Environmental, Social and Governance (ESG) criteria into investment decisions, particularly from millennials.
At the start of 2018, $11.6 trillion of all professionally managed assets were under ESG investment strategies, and this figure is only set to increase as ESG investment grows in popularity.
7. Increase in Outsourcing
Experts predict that a rising number of global managers will either initiate or continue to increase their outsourcing activities, particularly as demands placed on Chief Financial Officers and their teams continue to grow.
8. Innovation of Alternative Lending Products and Platforms
Innovations in financing are increasing the adaptability of financial systems around the world, allowing for a much more agile and innovative industry. This industry is becoming more accessible to a more diverse base, facilitating greater capital flows and allocations to this sector.
As people’s sense of what constitutes wealth continues to change, the global funds industry must continue to respond to these changes by creating new modes and tools of investment.
Highlighted section: https://fintech.global/more-than-9-5bn-has-been-invested-in-regtech-companies-globally-over-the-last-five-years/