Alpha FMC, the global leader in asset management consulting, has found that the evolving regulatory landscape will continue to be a major challenge for the asset management industry. The report, which is based on qualitative and quantitative polling of major asset management houses representing a combined £6trn AUM, found that whilst most asset managers consider that they are well set up to manage the regulatory agenda, it is proving increasingly costly, with 78% of respondents expecting to spend more in budgetary terms on regulation in 2015 than they did last year, rising to 89% in terms of time devoted to the issue.
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Other key findings were:
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Overspend on AIFMD regulatory compliance was cited as an issue, with almost two thirds of respondents (63%) spending more than initially budgeted last year.
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MiFID II, EMIR and Solvency II are causing the greatest concern.
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Half of the firms polled have created a function specifically dedicated to ensuring the implementation of regulatory change.
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70% of respondents consider their regulatory arrangements to be effective, with the remainder citing the challenges involved in moving from analysis to implementation mode and their ability to manage multiple interrelated streams of work in parallel.
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Respondents expect to on average spend between 21% and 30% of their change budgets on regulatory projects this year.
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A majority of firms – 80% - currently do not have a central regulatory reporting team, preferring instead to implement through multiple functions; however most of the managers surveyed are aiming to create such a central team in the near future.
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The inter-related nature of regulations is seen as a key challenge. PRIIPS in particular is considered to have contradictory elements to the UCITS regime, and there is overlap between EMIR and MiFID II for example. Indeed, the need for greater consistency of data standards in terms of regulatory reporting was also borne out by the study.
Commenting on the report’s findings, Duncan Spencer, Director, Alpha FMC, said: “One of the things that we found most interesting during our research was that, for asset managers, MiFID II is squarely positioned as the regulatory directive of primary concern for managers over the coming years. More generally, apart from the high implementation costs of ongoing regulatory compliance, most of the asset managers we’ve spoken to have bemoaned the lack of clear or consistent understanding of what each regulation is actually driving at. There is also scepticism as to the extent to which the regulatory agenda is being considered within the context of existing and future regulatory framework by policy makers.
As regulators continue to assess the new rules, our study delivers two requests from the businesses they are regulating: clarify the true objectives of all regulation, and consider regulation in the round - rather than as a collection of initiatives to be regarded in individual siloes.”
To download the report please click on the document below
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