Asset managers are facing unprecedented uncertainty.
So says KPMG’s annual Evolving Investment Management Regulation (EIMR) report which reveals that the asset management industry is busy implementing swathes of new regulations, with more changes on the horizon. This, coupled with the changing geopolitical context, creates the unprecedented uncertainty.
The report shows that regulatory drivers differ around the globe. However, there are some recurring themes, including whether asset managers pose a systemic risk to the financial system.
The global debate is nearing completion, with regulators indicating that investment and fund management activities can be ‘systemically important.’ The Financial Stability Board has issued policy recommendations to regulators and firms, with a focus on liquidity management for open-ended funds. More data on derivatives, leverage, liquidity profiles and portfolio composition are being sought.
Julie Patterson, author and Head of Regulatory Change in Asset Management, KPMG, comments: “The industry is being challenged about its business model. Its commercial relationships, remuneration practices and management charges are all under scrutiny. Some regulators are more focussed on disclosures, while others are introducing bans and restrictions. Wherever they are based, asset management firms must prepare for fundamental changes to fund distribution and the provision of services across borders.
“In the midst of this heavy regulatory agenda, perhaps the most difficult issue for firms to manage is uncertainty. Reviews of post-financial crisis rules – some of which have yet to bed down fully – and political events are causing nervousness about the direction of travel. We are likely to see continued convergence of regulatory approach on some issues, but greater fragmentation on others.”
Tom Brown, Global Head of Asset Management, KPMG, adds: “Today’s report shows that the global regulatory agenda for asset managers is heating-up. Stewardship and corporate governance are firmly in regulators’ cross-sights with an increasing focus on named individuals. Meanwhile, many pieces of post-financial crisis legislation are up for review within the next three years.
“Regulation has moved relentlessly forward over much of the last decade and it shows little sign of slowing for the asset management sector.”
Download the report.