Review/outlook series: Fund managers to expect "ruthless efficiency" from administrators

Dec 17, 2009

Fund managers will seek help from administrators to reduce costs in 2010, as slow fund growth continues, predicts Alastair Murray, HSBCÆs Asia-Pacific head of fund services.

In what's been a tumultuous year in the financial markets, fund administrators have had a relatively unremarkable 2009.

Global fund administrators' business was, for the most part, steady in Asia. Increasing offshore investment flows -- for example, Thai investors poured $2 billion into Korean government bonds this year alone -- and opportunities created by gradual regulatory changes, such as Taiwan's opening of the foreign futures market to Taiwanese investors, were offset by lower overall asset prices. Even the recovery in markets since March has not been enough to return them to pre-crisis levels.

But admin specialists have not rested on their laurels. Ireland-based Apex Fund Services opened in China in October and BNP Paribas Securities Services gained its first regional wholesale banking licence in Singapore in April, to name two firms to have pushed on in the region.

For a recap on the past year and an outlook on what's to come, we turn to Alastair Murray, Asia-Pacific head of fund services (ex-Hong Kong and Singapore) at HSBC Securities Services.

Looking back over 2009, what were the leading trends in Asia-Pacific fund administration?

Asia-Pacific markets experienced a notable recovery in asset values during the year, largely driven by stock-market growth. However, investors remained cautious, and investments in plain-vanilla fixed-income and money-market funds were most popular in most markets. Most fund managers were cautious too, with new fund launches and new entrants into the markets much slower than we had seen in recent years leading up to the global crisis.

What developments do you foresee in Asia-Pacific fund administration in 2010?

Expansion by fund managers into new markets is likely to continue to be slow in 2010. Fund managers will seek opportunities to outsource back-office and middle-office functions and will expect ruthless efficiency from their administrators to help them reduce costs.

Governments will continue to encourage long-term savings through mutual funds, but there will be an increasing focus on increased disclosure and investor education at the point of sale.

Progress towards more sophisticated investment funds, such as retail hedge funds, will be slow. There will be greater emphasis on the oversight role of an administrator/trustee.

What do you think will be the biggest Asia-Pacific growth story in 2010 -- investment into offshore funds or investment into local funds?

Good question. Many Asia-Pacific markets do not allow retail investors to invest directly in offshore funds. For those that do, such as Korea and Taiwan, we expect to see a greater use of onshore feeder funds into Luxembourg Sicavs, but we still expect fund managers to manufacture local funds as well, as there remains a possibility that regulations may change to give advantage to local funds.