This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes mutual fund and exchange-traded fund (ETF) product trends as of September 2024 and assesses the responsible investing product landscape.
Highlights from this research:
-At the end of September, mutual fund assets stood at $20.6 trillion, up 1.4% from August. Mutual funds continued to leak flows throughout the year, with $40.8 billion in September.
-ETF assets crossed the $10.0 trillion mark in net assets in September. ETF flows missed out on surpassing the $100 billion mark in September, generating $95.9 billion in flows.
-Concerns over greenwashing, political backlash, and underperformance have hurt overall responsible investing assets. As the landscape matures, product development has slowed, alongside a record number of recent mutual fund and exchange-traded fund (ETF) product closures. Despite these challenges, a broader range of products, structures, and asset classes are becoming available to investors. While anticipated demand from retail investors through advisor-sold channels has not materialized in a significant way, capital allocations from U.S. institutional investors remain solid.
Graham Howell has joined Corlytics as Chief Finance Officer with 35 years of experience with PE-backed firms, helping lead the firm as it continues its rapid expansion into the United States through organic and inorganic growth. Reporting directly to founder and CEO John Byrne, Howell brings 35 years’ experience in finance functions within the software industry, of which the last 15 years have been spent as the CFO of various SaaS software companies, including Nextlane, TraceOne and Ullink.
George Stephan
Franklin Templeton has appointed George Stephan to the newly created position of Global Chief Operating Officer of Wealth Management Alternatives. Stephan previously spent five years at Kohlberg Kravis Roberts & Co. (KKR), as the Head of Strategy and Business Development for the firm’s Global Client Solutions business. Before that, he was Chief Operating Officer and Head of Investor Relations for KKR’s Global Wealth Solutions business in the Americas.
Ryan Terpstra
ITRS, a provider of real-time IT monitoring and observability solutions, has appointed Ryan Terpstra as CEO. Terpstra succeeds Guy Warren, who has decided to step down from executive roles to spend more time with his family, after successfully leading the company for over a decade. Terpstra brings more than two decades of C-level experience leading and growing technology companies, spanning venture-backed startups, middle-market private equity-backed firms, and global public corporations. Most recently, he was Chief Product Officer at ION Analytics.
Broadridge Financial Solutions has announced the appointment of David Fellah as Vice President of AI Trading Solutions at Broadridge, based in New York City, NY. He will report into Roger Burkhardt, Enterprise Head of AI and Data and CTO of Capital Markets at Broadridge. With nearly 30 years of expertise at the cutting edge of trading technology, quantitative research, and advanced analytics, Fellah brings significant leadership experience from roles at Instinet (Nomura), ITG, and J.P. Morgan.
CoinShares has appointed Lisa Avellini as Group General Counsel, effective November 4, 2024. Avellini brings a wealth of valuable experience to CoinShares, with an extensive background in legal and compliance roles within leading global financial institutions. She joins CoinShares after three years at Balyasny Asset Management, where she oversaw global legal and compliance requirements. She is also an alumnae of Citadel.
Robert Eaton has joined Northern Trust Asset Management as a Senior Relationship Manager within NTAM’s Wealth Client Group. Eaton brings more than 20 years’ experience in asset management, exchange traded funds and wealth-tech. His prior experience includes serving as Head of Strategic Relationships at BondBloxx Investment Management ETFs; a variety of business development roles at BlackRock including Head of Americas Business Development for Aladdin Wealth Tech and Head of National Accounts for BlackRock and iShares; and as Head of US Retail Marketing at Merrill Lynch Investment Managers.
The FCA and PSR boards have announced the appointment Alison Potter as chair of the FCA’s Regulatory Decisions Committee (RDC) and the PSR’s Enforcement Decisions Committee (EDC). Potter has previously been appointed as a senior decision maker for the Guernsey Financial Services Commission in 2018. She has over 30 years of experience as a barrister working in commercial law, specialising in financial services and financial regulatory law.
If you have a new job or promotion to report, let me know at alyudvig@marketsmedia.com
The traditional asset management industry is standing on a precipice, facing immense pressure from all sides. Small and medium-sized investment houses, juggling both equity and fixed-income portfolios, are especially feeling the heat. As retail investors continue to flock to passive investment giants, and institutional investors demand greater customisation at ever-lower fees, many traditional players find themselves struggling to keep up. It’s a battle for survival, and the truth is, this crisis has been looming for years. The cost squeeze that asset managers are now experiencing has reached breaking point.
At the heart of the problem lies a plethora of inefficient processes that have, until now, been tolerated. Research by Coalition Greenwich reveals that outdated systems for managing and sharing data — including manual processing — are costing asset managers millions of dollars each year. One example is the daily grind of trade reconciliation. Each trading day, custodians send data packages to asset managers, outlining the value of assets held on behalf of their clients. These figures need to be reconciled with the fund manager’s own internal records, which include any intra-day trades taking place through brokers. If discrepancies arise, such as trades that haven’t been processed or mismatched valuations, a small army of people is needed to track down the issues and resolve them. It’s a tedious, time-consuming, and frankly immensely costly affair that the industry can no longer afford to absorb.
This archaic approach is just one example of where traditional asset managers can haemorrhage resources. As with many of the operational challenges faced by asset managers, the solution lies in creating a reliable, accurate, and timely source of truth for data that can effectively underpin a fully automated process. Rather than wasting valuable time sifting through data to find exceptions and errors, asset managers can fully automate workflows. This provides real-time trade monitoring, comprehensive audit trails, and configurable alerts which maintain trade integrity. The copious time saved from this automation can then be redirected towards higher-value activities. From conducting deeper market analysis and making more informed decisions to optimise portfolio performance, to spending quality time with clients to understand their needs — think of all that could be done with the additional headspace.
Asset managers have no choice but to adapt. While automating processes is an essential step, it’s about more than just replacing manual tasks with technology. The future lies in fostering a culture of continuous improvement, built on an operating system that connects the past with the future. Such a system should allow firms to be data-driven, using automation, machine learning, and AI to enhance decision-making. Building this foundational infrastructure and mindset is not just a cost-saving measure — it’s the key to remaining competitive in today’s passive-dominant market. Without it, asset managers risk becoming relics of the past, unable to keep pace with an industry that demands adaptability and forward-thinking solutions.
Integration of AI is Reshaping the Business of Market Data Providers – New Burton Taylor Report
Clients are influencing the deployment of AI-driven solutions, demanding more automation, precision, and actionable insights from data providers.
AI will provide a path to greater production and variety of data, with Burton Taylor expecting AI to contribute 3.3% to the market data industry TAM by 2029, growing at a 56% CAGR to 2029.
Burton Taylor estimates that AI will add an incremental $1.9 billion to market data providers’ revenues.
November 1st, 2024 – Artificial intelligence is affecting data products for both human and machine consumption, changing the dynamics of data use and demand, and internal operational processes. A new report from Burton Taylor International Consulting, part of TP ICAP’s Parameta Solutions, evaluates AI’s present and future influence on data consumption, the emergence of new data types, and exponential data growth.
“AI is being leveraged across the market data and capital markets value chain. Today POCs are exploring the next generation of AI for use in human and machine consumption of data. “AI is substantially impacting the market data business. It allows new levels of operational effectiveness in the processing of data and sets the stage for new types of data products that market participants will demand,” says Brad Bailey, Research Director at Burton Taylor. “AI in the capital markets will look very different by 2029.”
The future progression, however, will not be without its challenges to data providers, according to the report. “While AI offers significant benefits,”notes Bailey, “Market data providers face hurdles in areas such as data readiness, regulatory compliance, explainability, and intellectual property. These challenges require continuous investment in data governance, model transparency, and legal frameworks to ensure that AI is deployed responsibly and effectively.”
This new Burton Taylor report explores how the integration of AI is fundamentally reshaping the landscape for market data providers, driving innovations in data processing, analytics, and product delivery. Further, it looks at the way AI sets new standards for how financial data is consumed and utilized by enhancing data quality, automating workflows, and enabling real-time insights.
The Bank of New York Mellon Corporation, a global financial services company, announced the expansion of its iFlow1 product offering, with more extensive fixed income and equity data analytics. iFlow provides a unique vantage point of insights into BNY’s more than $50 trillion in assets2 under custody and/or administration, revealing global asset allocation trends and market-moving reactions, to investment managers and asset owners.
With this expanded capability, BNY’s iFlow will now be able to generate on-demand charts for shorts, holdings, and positioning, complementing existing flow views. This allows for clearer definitions of rotation trade equity, credit, and duration in bonds and, ultimately supports improved benchmark definitions and portfolio construction.
iFlow will now provide the following fixed income and equity insights:
· iFlow Shorts: aggregates short interest metrics that capture borrowing and lending behavior, aiding portfolio managers in making portfolio construction decisions.
· iFlow Holdings: reflects investor exposure to stock and bond markets, showing an aggregated view into how investors have allocated capital across country, sector, credit rating and maturity.
· iFlow Positioning: measures investment preferences based on aggregated investor holdings, showing capital deployment across countries and sectors, compared to other asset classes and benchmarks.
The new indicators are designed to provide transparency into unexpected market moves and show how markets have acted historically, helping to determine the potential vulnerabilities around shock events.
“Finding ways to distill and understand market data continues to be one of the most important priorities for our clients. The challenge of today is no longer about getting access to vast market data sets but finding ways to unpack and generate insights,” said Jason Vitale, Head of Global Markets Trading at BNY. “Given our unique vantage point, touching about a fifth of the world’s investable assets, and through our expanded iFlow capabilities, we’re able to help clients better understand global markets.”
With economists having to react to news cycles getting even shorter and market events happening quicker than before, they can no longer count solely on the traditional widely disseminated macro-metrics and tools to provide actionable analysis, according to Michael McDonough, Chief Economist for Financial Products at Bloomberg.
Michael McDonough
On October 30, Bloomberg in partnership with Coalition Greenwich released a new study that assesses how U.S. economists and strategists are utilizing data, analytical tools and emerging technology in anticipation of the most impactful macro events, including the U.S. Presidential Election.
The study reveals that economists from leading asset managers, top banks and broker research firms, NGOs and government agencies are adopting new predictive tools, alternative data and generative AI.
McDonough said that for example, in the first presidential debate, people were caught off guard by what happened.
“Relying on traditional polling data means waiting days or even weeks to assess the impact,” he told Traders Magazine.
“Predictive markets, however, offer an immediate sense of how significant an event might be, allowing for a faster understanding of its implications,” he said.
“Broadly speaking, traditional data is very backward looking, and people are trying to get a read on where we are now, not where we were a month ago,” he added.
McDonough said that another key finding, which supports this, was that economists rank alternative data—particularly social media sentiment analysis and real-time consumer transaction data—and Generative AI-enhanced analytics as the #2 and #3 most important tools to analyze macro drivers over the next 12 months.
“We’ve offered prediction market data on the Terminal since 2020, so while we were aware of the demand, we underestimated just how significant that interest would become,” he commented.
According to the findings, early career economists highly value generative AI for use in forecasting models as the single area of their workflow that may be transformed in the coming 2-3 years.
Kevin McPartland
Kevin McPartland, Head of Market Structure and Technology Research at Coalition Greenwich, commented that experienced economists and strategists are also looking to complement traditional tools with innovative solutions, as shown through their adoption of alternative datasets in their daily workflows.
“In our research, 53% of economists with 15-years or more of experience reported utilizing social media sentiment data daily, 47% utilized real-time consumer transaction-level data, 47% utilized web traffic and app usage data, 35% event driven feeds, 29% geolocation data (including foot traffic data) and 24% satellite/imagery data,” he shared.
“Considering this, when analyzing the U.S. economy, 56% of economists with 15-years or more of experience still view point-in-time data as more important than alternative data,” he said.
McPartland told Traders Magazine that forecasting is only one of AI’s early applications, and economists are already adopting AI in complementary ways beyond prediction as they try to determine its value.
For example, he said, the study found that AI is widely used in summarization tools, with 33% of economists and strategists identifying it as the most transformative AI application in their workflow, and 18% viewing sentiment analysis as most transformative.
“Specifically when trying to figure out risk analytics and the sensitivity of a position to the election for a portfolio, macro investors can utilize these AI tools and alternative metrics to help gauge the potential risks, he said.
The findings also suggest that fast, robust, and easily accessible data is key.
“Economists today are faced with an overwhelming array of data, and the ability to quickly access and synthesize this information is essential,” McDonough said.
He stressed that with the sheer volume of data out there today, economists and strategists need to seamlessly integrate it into their workflow and connect all of it to find the signal in all this noise.
“That’s where AI plays a critical role to seamlessly connect the data, model it, present it in a way where they can then extract insights and signals,” he said.
“This is going to become very crucial for economists and strategists in the future, especially as they continue to have to analyze larger raw and calculated data sets than ever before,” he concluded.
FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet, a Nomura company.
The US election on 5 November 5 is definitely top of mind. So it is unsurprising that Goldman Sachs’ latest Top of Mind report focuses on post-election economic policies. Alec Phillips, chief US political economist in Goldman Sachs Research, said in the report that financial regulation could change in a second Trump administration, with potentially faster shifts across consumer finance than in the case of capital and liquidity requirements.
Under a second Trump administration, Goldman Sachs also expects an easier regulatory climate for several sectors including energy, antitrust enforcement and healthcare.
“That said, while reduced regulation could in principle boost economic activity, our prior bottom-up work in this area suggests that deregulation during the first Trump Administration had a limited macroeconomic impact,” added Phillips.
The bank also looked at the possible impact on asset classes including equites:
At Northern Trust, Grant Johnsey, regional head of client solutions for capital markets found there are seven instances in which the S&P 500 returned over 20% in a calendar year before a presidential election year. In those seven instances, the S&P 500 closed higher in the subsequent election year. Therefore, unless there is a dramatic sell-off in the last two months of this year, 2024 should be the eighth instance where the S&P 500 closes higher in an election year following a 20%+ gain in the previous year.
Jim Toes, president and chief executive of STA, said in a newsletter that things to keep in mind as the election approaches include buy hope, sell fear; the need to educate yourself and vote and to be gracious.
He stressed that the STA is bipartisan: “No matter what the political landscape may look like on January 20, 2025, STA’s mission will remain the same. We are here to represent the securities industry and the interests of you, our members.”
His final piece of advice:
“Meteorologists worldwide are in agreement that the sun will rise on Wednesday, Nov. 6. We may not know who the next president will be on that day, but we will eventually. And life will go on.”
In a similar vein, writer Oliver Burkeman gave some advice on how not to freak about the US election.
Burkerman said: “For years now, since long before I started writing books, I’ve found solace and breathing-space in a question from Eckhart Tolle: “Do you have a problem now?” “Narrow your life down to this moment,” Tolle writes. “Your life situation may be full of problems – most life situations are – but find out if you have any problem at this moment. Not tomorrow or in ten minutes, but now.”
This was backed up by the Daily Stoic website which quoted Marcus Aurelius’ Meditations:
“You must build up your life action by action, and be content if each one achieves its goal as far as possible—and no one can keep you from this.”
The Daily Stoic added: “Being virtuous, like voting, is within our power. Whether it visibly changes the world is not. But we act because it is our duty, and that alone is reason enough. The same applies to voting—in this election, in the next election, in every election. Make your small contribution to the common good, because even if it doesn’t reshape society, it shapes you.”
The Investment Association, the trade body for UK fund managers, is aiming to widen the discussions following the release of the the final report from the Technology Working Group on the industry’s use of artificial intelligence.
On 10 October the UK government published the final report from the Technology Working Group, consisting of policymakers, regulators and market participants, which was set up to identify how the UK investment management industry could harness the potential of innovative new technologies.
Michelle Scrimgeour, chief executive of Legal & General Investment Management and chair of the Technology Working Group, said in a statement that the implementation of analytical AI has been foundational in algorithmic trading and anti-money laundering monitoring.
Michelle Scrimgeour, LGIM
“However, the use of AI is evolving at great pace and the advent of generative AI is a capability that marks a real paradigm shift for our industry,” she added. “When paired with the promise shown with tokenization, the new technological innovations outlined in this report have the potential to redefine how we think about asset management over the next decade.”
John Allan, head of innovation and operations at IA, told Markets Media that the tokenization blueprint was important because it put the UK on a firm footing to start the conversation and as a result, the FCA joined Project Guardian to help learn lessons from Singapore.
“We hope this report on AI will ensure that the UK is able to position itself as an innovative jurisdiction,” said Allan.
He continued that there is now an opportunity, as the trade body had with the previous report on tokenization, to widen the group of members who are involved in discussions beyond the taskforce.
“I think the report was a sober assessment of where we have got to,” Allan added. “It is a very practical and realistic vision of where AI could take us in the future as it is potentially transformational.”
AI can have a transformational role in asset management, for example, by providing quick access to almost any data point to provide actionable insights for portfolio managers. However, Allan highlighted there are still some downsides in terms of Gen AI’s propensity to hallucinate, and giving probabilistic answers when the asset management sector needs very accurate, deterministic outputs. In addition, the sector is highly regulated and regulators’ have objectives in terms of consumer protection and avoiding consumer harm.
“Potential risks and the governance framework have a lot of interest from members because they are very practical in nature, and we have set some fairly ambitious targets in terms of timeframes,” added Allan.
The Investment Association is owner of recommendations from the report around AI risks and governance; legal uncertainties and the UK fintech ecosystem.
Source: Technology Working Group
Key recommendations from the report include stabilizing regulatory clarity and consistency to enable developers and users of AI to plan and invest with confidence; building a UK fintech ecosystem with strong international connections; joint public and private sector action on AI-enabled fraud; managing systemic risk through collective understanding and identifying best practice in risk management.
Combining blockchain and AI
Allan continued that the combination of blockchain and AI is one of the really interesting discussions.
“It’s certainly not something that is happening today or in the very near future but it is part of the really exciting piece that we could see over a longer timeframe,” he added.
The Investment Association believes that personalization and the power of AI will change the nature of the fund, and has called this new world Investment Fund 3.0 (IF3.0). It consists of a single digital record on a shared blockchain, rather than multiple agents along the value chain running separated record-keeping systems and processes.
Allan gave the example of AI being used to perform tasks that are otherwise performed by humans while DLT provides trust in a trustless environment and said that pairing the two together can be a significant and powerful tool for providing better, more efficient and effective services for consumers.
For example, smart contracts could rely on external data sources that have been assisted by AI.
John Allan, IA
“That feeds into our wider agenda about modernising the infrastructure for investment funds and to providing better services for consumers who are used to operating in a digital environment,” he said. “We would advocate looking at the two in tandem as they progress over the next few years, rather than seeing them as silos that never overlap.”
There are ongoing discussions about how to get explainability on AI, and how that would fit in with the FCA’s senior manager regime, which identifies individuals in firms who are accountable for certain functions, according to Allan. He said the IA has always advocated that firms should not need a designated officer for artificial intelligence, because it is just a technology.
“For example, if AI is being used in the investment process, then the investment officer is responsible,” he added.
The World Federation of Exchanges, has also published a paper on the opportunities and challenges surrounding AI and suggested three 3 foundational principles – principles-based regulation; a risk-based framework and alignment of regulatory standards.
Richard Metcalfe, head of regulatory affairs at the WFE, said in a statement that a failure to strike the right balance in the regulation puts more than growth at risk.
“More advanced machine learning models and generative AI has opened new avenues for enhancing operational efficiency, improving market surveillance, and managing risk,” added Metcalfe. “Policymakers must take care that regulatory changes don’t leave investors more exposed to risk, with overly broad regulation stifling the use of AI in safeguarding markets.”
Global capital markets publisher, Markets Media Group, has acquired Trader TV, the leading online trading TV provider, to form a multi-media giant, spanning the USA, Europe, and Asia Pacific.
“Trader TV adds nearly a decade of video and podcast capabilities to Markets Media’s offering allowing us to reach capital markets professionals in every medium,” says Mohan Virdee, CEO of Markets Media.
Mohan Virdee
“Bringing live, recorded and in-event video will ensure our audience gets the best access to information however they want to consume it.”
Trader TV Ltd currently delivers multiple shows spanning asset classes, and touching upon a broad range of financial services businesses.
These include:
· Trader TV This Week: Hosted by Josephine Gallagher, analysing dynamics impacting trading each week;
· Trader TV Marketplace: Market operators outline the tides of activity that traders need to navigate every quarter;
· Trader TV Thematic: Regular interviews about issues and developments across buy- and sell-side trading;
· Trade Finance TV: A monthly show analysing trade financing of projects and global business, in partnership with Deutsche Bank.
· Trader TV Live: Live-streamed shows for interactive access with an audience;
· Trader TV In Conference: Big screen interviews shown at live events to crystalise ideas for an audience ahead of live discussions.
“Trader TV can now reach Markets Media’s audience of three quarters of a million finance professionals around the world, giving our expert content a far greater reach,” says Hamish McArthur, co-founder of Trader TV.
Markets Media Group is headquartered in New York, with offices in London, and manages titles including Traders Magazine, Markets Media, The DESK, Global Trading and Derivsource, as well as Trader TV.
It operates partnerships with FIX Global, the organisation managing the FIX trading protocol, and events organiser WBR across North America, Asia Pacific and Europe.
Markets Media’s awards programme will be expanding in 2025 to cover Latin America in addition to its existing Asia Pacific, European and US events.
(This article first appeared on Global Trading, a Markets Media Group publication.)
For tourists, Australia and New Zealand offer their natural wonders, cosmopolitan cities, and laid-back vibes; for financial institutions, custodians, and exchange operators, primary attractions are stable economies, fast-growing pension plans, and modernising market infrastructure.
As the Australia and New Zealand markets develop, high-level trends include consolidation, among asset managers as well as custody providers; internationalisation, in the form of expanded access to global markets; and asset servicers stepping up to meet institutions’ increasing need for digital solutions.
A key in the capital markets ecosystem is the custodian, or asset servicer, which provides custody, safekeeping, clearing, and administration of securities held by institutions. Custodians are especially important in relatively small yet evolving markets such as Australia and New Zealand, where inbound capital flows are rising, domestic asset owners are seeking global investments, and all parties want better technology and more efficiencies in trading and clearing.
Mark Wootton, BNP Paribas.
“Offshore investments into the local markets and the domestic investment from the buy side into the markets are critical, and custodians play an important role here, as we see a lot of flow going through our books and onto the exchange,” said Mark Wootton, Co-Head of the Financial Intermediaries and Corporates Client Line in Asia Pacific, Securities Services, BNP Paribas. “Where we add value specifically is on offshore investments into these markets, where we can demystify and give clients one view, whether they’re transacting in Hong Kong SAR, India, New Zealand, Australia, or elsewhere.”
“Custodians are enablers for investors – we’re the ones that do all the behind the scenes work – and also understand client requirements,” Wootton said. “There’s also an element of bringing economies of scale, which means providing a price point for which it makes sense for clients to transact in these markets.”
New Zealand’s KiwiSaver, which launched in 2007, oversaw $115 billion as of March 2024, comprising $68 billion of overseas assets and $47 billion in domestic assets.2
Philippe Kerdoncuff, BNP Paribas.
The pension plans’ oversized importance to the economies of their nations is a unique feature of their capital markets. “It has been a proven successful pension system, representing a very big part of the capitalisation of each market,” said Philippe Kerdoncuff, Head of Asset Owners and Asset Managers Client Lines, Australia and New Zealand for Securities Services at BNP Paribas.
Lisa Briggs, ASX.
Lisa Briggs, Senior Manager, Equity Post Trade Services at ASX, noted bullish demographics for Australia’s superannuation funds – specifically, the strong presence of retail investors between the ages of 18 and 24 who are keen to educate themselves and invest in their future.
As New Zealand is a smaller market – its projected 2024 GDP of $258 billion is about one-seventh Australia’s $1.79 trillion3 – its domestic managers need to look harder for overseas investment opportunities.
“Local asset owners need to work with global custodians to get international exposure,” said Iain Martin, Head of Territory, New Zealand for Securities Services at BNP Paribas. “Also, as in Australia, there’s a real pressure on costs in the market, so there’s a race to gain efficiencies of scale. There’s a lot of consolidation among smaller custodians,” he said.
Iain Martin, BNP Paribas.
Recent consolidation among capital markets participants in New Zealand include Forsyth Barr’s purchase of Hobson Wealth; Jarden and NAB combining their wealth advice and asset management businesses into a new entity called FirstCape; and the merger of global players UBS and Credit Suisse. The local M&A activity has been prompted at least partly by lower levels of market liquidity that has pressured capital markets firms’ cost structures, according to Jeremy Anderson, General Manager, Capital Markets Development at NZX.
Jeremy Anderson, NZX.
In a July 2024 note to clients4, BNP Paribas’ Securities Services business cited post trade as a primary topic of importance globally, especially in light of the U.S. moving to T+1 settlement as of May. Specific to Australia, a potential move to T+1 was cited, while in New Zealand, topics of interest were the Reserve Bank of New Zealand’s public consultation on the design of digital cash and financial services conduct regulations.
The country-specific business items underscore that despite global market participants often perceiving Australia and New Zealand as one market, there are important nuances that need to be understood. “For example, there are some very specific New Zealand tax laws around asset owners that are quite different from Australia,” Martin said. “So, for a custodian to properly support New Zealand asset owners, you need an on-the-ground presence.”
Data-Informed Custody Scale has gained importance for custodians as institutional asset owners increasingly adopt master custody, a structure in which they have multiple investment managers but only one custodian. Kerdoncuff noted that master custody provides buy-side clients with a consolidated view of their investments, a single point of contact for all investments, and services pertaining to valuation, reporting and monitoring of investments. While each benefit is important in itself, the true value-add is that the whole is greater than the sum of the parts.
As data – including new frontiers such as environmental, social and governance (ESG) data and private-market data – has become more critical for market participants, a new type of master custody has emerged, enriched with data.
“As a custodian, we are sitting on quite a high level of data, and we want to leverage that data to provide a strong solution for our clients,” Kerdoncuff said. “Clients want to use their data, so we need to structure and clean the data to provide a suite of reporting analytics using that data.”
“And it’s no longer listed assets only – we need to provide a consolidated view across all asset classes, including private assets,” Kerdoncuff continued. “You need to have the proper technology to clean, scrub and aggregate the data, and then provide it to the client in the right manner. It’s a bigger challenge for custodians, but it’s a matter of having the right tools and the right processes in place.”
Digital Transformation
Technology is a critical aspect for smaller securities markets like Australia and New Zealand, both to attract international capital and to provide domestic market participants with the efficiencies and low trading costs found in global financial centres such as New York, London and Hong Kong SAR. Tech innovation and evolution, largely driven by custodians and exchange operators, is prized by market participants for its ability to ‘future-proof’ business models.
The New Zealand Stock Exchange punches above its weight technologically by outsourcing its trading engine to Nasdaq, and its clearing and settlement systems to Tata Consultancy Services (TCS). “Beyond that, we are able to innovate more and evolve at the forefront of technology in our systems, like our websites and our adoption of cloud for data delivery,” said Anderson of NZX.
ASX’s Briggs said: “ASX continues to focus on technology modernisation and innovation, and leveraging the data in our customer relationships.”
“There is a lot of work to do, but the technological changes will help uplift the global angle of investment to Australia,” said Wootton of BNP Paribas. “Some of the legacy processes will be revamped, so there will be efficiencies, and it will move more toward what global players see in other markets.”
In the wake of the U.S., Canada, Mexico, and Argentina shortening settlement to T+1, market participants are keen to see alignment of settlement cycles in all major jurisdictions to reduce complexity and cost5. ASX published a whitepaper in April 20246, outlining how Australia’s unique market structure, size, time zone, investment flows, and trading activity necessitates careful industry consideration of the risks, benefits, and costs of transitioning to T+1.
Briggs said the ASX will continue to work with the industry and regulators to determine the best course of action, and an update is expected to be announced by the end of this year.
As Australia and New Zealand capital markets enter the next phase of their development, while retaining their uniqueness, global custodians who attain trusted-partner status will go along for the journey.
“We see the role of the custodian as bringing our global technologies to assist with the efficiencies of local capital markets,” BNP Paribas’ Martin said. “Whether that’s third-party clearing products and technology, or derivative products and technology, or anything else, providing a global reach brings efficiencies to local markets.
A Lack of Automation is Draining Asset Managers’ Competitive Edge
By Thomas McHugh, CEO and Co-founder, FINBOURNE Technology
The traditional asset management industry is standing on a precipice, facing immense pressure from all sides. Small and medium-sized investment houses, juggling both equity and fixed-income portfolios, are especially feeling the heat. As retail investors continue to flock to passive investment giants, and institutional investors demand greater customisation at ever-lower fees, many traditional players find themselves struggling to keep up. It’s a battle for survival, and the truth is, this crisis has been looming for years. The cost squeeze that asset managers are now experiencing has reached breaking point.
At the heart of the problem lies a plethora of inefficient processes that have, until now, been tolerated. Research by Coalition Greenwich reveals that outdated systems for managing and sharing data — including manual processing — are costing asset managers millions of dollars each year. One example is the daily grind of trade reconciliation. Each trading day, custodians send data packages to asset managers, outlining the value of assets held on behalf of their clients. These figures need to be reconciled with the fund manager’s own internal records, which include any intra-day trades taking place through brokers. If discrepancies arise, such as trades that haven’t been processed or mismatched valuations, a small army of people is needed to track down the issues and resolve them. It’s a tedious, time-consuming, and frankly immensely costly affair that the industry can no longer afford to absorb.
This archaic approach is just one example of where traditional asset managers can haemorrhage resources. As with many of the operational challenges faced by asset managers, the solution lies in creating a reliable, accurate, and timely source of truth for data that can effectively underpin a fully automated process. Rather than wasting valuable time sifting through data to find exceptions and errors, asset managers can fully automate workflows. This provides real-time trade monitoring, comprehensive audit trails, and configurable alerts which maintain trade integrity. The copious time saved from this automation can then be redirected towards higher-value activities. From conducting deeper market analysis and making more informed decisions to optimise portfolio performance, to spending quality time with clients to understand their needs — think of all that could be done with the additional headspace.
Asset managers have no choice but to adapt. While automating processes is an essential step, it’s about more than just replacing manual tasks with technology. The future lies in fostering a culture of continuous improvement, built on an operating system that connects the past with the future. Such a system should allow firms to be data-driven, using automation, machine learning, and AI to enhance decision-making. Building this foundational infrastructure and mindset is not just a cost-saving measure — it’s the key to remaining competitive in today’s passive-dominant market. Without it, asset managers risk becoming relics of the past, unable to keep pace with an industry that demands adaptability and forward-thinking solutions.