Palmér predicts that, in the coming years, fund distributors will continue to outsource to platforms.
“We will see distributors outsourcing non-core services such as trading and custody to streamline processing, and distribution services to reduce legal and regulatory compexity,” he says.
“The second leg of growth will be with fund companies. Unlike distributors, who require standardised services at a low price, fund companies are actively looking for new services to help them distribute their funds, develop their business in new markets and outsource non-essential tasks while keeping control over their distribution.”
He also thinks there will be growth in dedicated services which support them. Taking a holistic approach to supporting fund companies manage their distributor networks includes the intermediation of the contractual relationship, due diligence and management of fund data.
Demand for data analytics will continue to increase. Euroclear and MFEX sit on an enormous amount of data. This provides an opportunity to industrialise the funds industry, which is lagging the securities market.
“The platforms are becoming marketplaces for services towards different participants, and there will be services that MFEX and Euroclear will develop together, but also being aggregators of services, and providing them through a single point of entry,” says Van de Velde.
Clients want to know who is buying their products and through which channels. Because of their size and central position, market infrastructures play a big role in providing market transparency at the issuer level.
For MFEX, a world leader in terms of distributor assets, providing that transparency back to the asset manager is very important.
In the future, Palmér says that providing data analytics up to the end-investor level is going to be key. He says this would be particularly useful for an asset manager when setting up a new strategy. For example, they may be keen to know where, geographically, there is investor demand. “When a manager initiates a campaign in a specific market, they will want to have some concrete feedback from that campaign,” he adds.
Other dedicated services for clients could be to digitalise compliance, onboarding work flows, providing portfolio managers with further breakdowns of the underlying assets, or helping risk managers manage liquidity.
As the growth in environmental, social and governance (ESG) funds continues, having transparency and understanding of the underlying components will be very important. One of the issues with ESG is that there have been numerous examples of greenwashing.
Data can play a big role here in solving the issues of tracking ESG and knowing whether the criteria is right, Palmér says. “I would say that the industry is probably not looking at the right data there yet. Investors will want to know whether an ESG strategy helped to reduce the carbon footprint, reduce homelessness or improve gender equality.
“The performance indicator on that fund is no longer only measured in terms of returns, and that is a big challenge for the industry because we’re not used to working with that kind of data.”
By combining their complementary services under the name ‘MFEX by Euroclear’, this new entity is well positioned to maximise business opportunities in partnership with the clients.