Article: Navigating the Evolving Fund Platforms Landscape: Challenges and Trends
In the ever-changing world of fund platforms, professionals face a dynamic landscape shaped by regulatory shifts, technological advancements, and investor demands. In this article, we explore the critical challenges and exciting trends that define this industry with Christophe Hefti, Head of Sales – Central European Eastern region at Clearstream Fund Centre.
Why do we need fund platforms?
Fund platforms, such as Clearstream Fund Services, ensure that there is a marketplace for supply and demand in the fund industry. Without these marketplaces, the business of fund execution, fund distribution, fund data and a broad range of digital services would be even more fragmented than it is today. Fund platforms help to bundle supply and demand in one digital location. In addition, the infrastructure and services provided by fund platforms ensure that fund providers and fund distributors can focus on their core competences.
Could you describe Clearstream Fund Services current range of services?
Clearstream Fund Services provides services across the entire value chain of the fund industry. As a leading fund processing platform, these services include access to over 230,000 funds from over 700 fund houses. The distribution platform provides a comprehensive universe of products with distribution support and more than 1,000 data points and documents for over 86,000 funds. Other components of the offering include AML-KYC & KYD tools, highly efficient fund processing using distributed ledger technology, and smart tools that show market trends and fund flows.
To what extent are processes and data in these fund platforms already automated, and where is there still room for improvement?
Automation and digitalisation are core elements for reducing complexity and risks in the fund business.
In this respect, we have invested heavily in these areas. Our wealth of experience in the market helps us recognise trends at an early stage and drive innovation, for example in the issue of fund units with the help of distributed ledger technologies. Today, most funds can be processed and held in custody automatically via SFTP, FIX, Swift or API utilising our fund execution capabilities via Vestima. The remainder can be handled with outstanding execution capabilities that allow the greatest flexibility adhering to fund houses and transfer agents specific requirements.
You always read about economies of scale as an argument for platforms. Is there another way to score points - for example by specialising in certain segments (crypto assets, structured products, ETFs, distribution to certain target groups, etc.)?
In recent years, Clearstream has driven consolidation in the fund services market through an investment programme and acquired, among others, the Swisscanto and UBS fund distribution platforms, as well as KNEIP as a data provider and FundsDLT.
If we believe the teaching and research, there are two strategic directions for successful companies: size and economies of scale or specialisation.
Size should not be equated with fund volume or the number of funds and fund houses, but rather as the totality of all factors including the range of services and the international markets covered.
In principle, platforms must be of a certain size and grow to provide a comprehensive offering that covers the emerging and future needs of fund houses and distributors. To fulfil the international growth ambitions of fund houses, a correspondingly growing distribution network is required.
In the future and with increased pressure on margins, distributors and fund houses will have to think even more carefully about which platforms they want to work with to achieve their goals/markets and what level of service they need or are willing to outsource to platforms. Large platforms can also absorb increasing compliance and regulatory requirements for distribution in various markets. This will be more difficult for niche players, as the international ambitions of asset managers cannot be met internally.
One thing that has become very clear, however, is that even large international platforms must have locally based representatives and support.
Be global, act and be local.
What trends are emerging in fund platforms today? How and where will platform models develop?
The current trends in fund platforms are clearly driven by customers and customer needs. Private markets investments, ESG analyses and reporting, as well as digitalisation requirements are emerging here. The biggest challenges for the fund industry over the next few years will be to meet the "value for money" requirement in the European retail investment strategy, to absorb the consolidation on the asset manager side and the ongoing challenge to recognise the trends and adapt the offering for their customers at an early stage, if necessary.
Why should people consider cooperating with Clearstream - as a wealth manager, private bank, insurance company or as an asset manager with investment funds?
As a locally anchored but internationally orientated platform, with a comprehensive but modular offering, we can support our clients in the best possible way. We strongly believe in close cooperation to jointly and better master the complexity and requirements in the areas of data, digitalisation and distribution so that they can focus on their core competence: fund distribution for asset managers and providing financial advice for wealth managers, private banks and others.
Interview first published in B2B Magazin.