Section 2 - FTSE

individual investors have not been completely deterred. On
the contrary, many may well be considering a shift in their
own investment allocation into alternatives. “Equities are
phenomenally volatile and a large number of investors are
seeking a longer term yield, including the kind of returns
which are offered through alternative investments such as a
closed-ended structure, as well as investments in private
equity or real estate,” says Harland. “We are seeing a great
deal of activity and there is a feeling that investing in the
current climate could prove the next few years to be vintage.”
Turning up the heat
In the United States, a new administration and a more
powerful Democratic congressional majority point to an
even greater emphasis on transparency and regulatory
oversight. Meanwhile, the universal crackdown on short
selling is evidence that governments everywhere are just as
willing to tighten the screws. “In September alone there
were at least 15 regulatory changes dictated from the
Securities and Exchange Commission (SEC), the Federal
Reserve Board (FRB), the Commodity Futures Trading
Commission (CFTC) and from the Financial Accounting
Standards Board (FASB),”notes State Street’s Greene. Many
of these changes require adaptation and implementation
within weeks of their announcement, he adds. “Changes in
regulation will drive up the cost of compliance, requiring
continued investment in order to keep pace.” This once
again points to the value of outsourcing in order to achieve
the goal of lowering costs while implementing new
standards, says Greene.
Mourant’s Harland agrees that the recent economic
turbulence has led to increased pressure for the regulation
of certain financial markets. “A key requirement of the
administrator is to maintain granular data of the fund or
funds which it administers, which is managed by informed
client-relationship teams with a broad knowledge of
financial reporting standards as well as regulatory and
investor requirements. We believe this enables us to
respond to the changing reporting requirements of
investors, clients and regulators.”
For instance, in the United Kingdom the guidelines for
transparency outlined in last year’s Walker Report serve as
an example of how the reporting environment is changing.
“We have seen a number of clients, from start-ups to blue
chip firms, acknowledging and taking steps towards
adopting the Walker guidelines,”says Harland.“Our teams
are well placed to provide clients with guidance on how to
implement the various aspects of the report.”
Given the current regulatory environment, BBH’s Páircéir
is hopeful that forthcoming policy procedures are moderate
and can be easily leveraged. “Daily NAV production and
underlying delivery of portfolio information to investors,
transparency of information to stakeholders in investment
vehicles, and directors’ oversight and responsibility all lead
to an already significant volume of reporting. We support
the current level of necessary oversight measures, but see
no real need for an increase in this burden.”
F T S E G L O B A L M A R K E T S • J A N U A R Y / F E B R U A R Y 2 0 0 9
Peter Cherecwich, head of global product and strategy for Northern
Trust’s asset servicing business, thinks that administrators with custodial
ties have a competitive advantage in this type of environment.
“Custodians have the flexibility to shift clients in and out of strategies
with much greater ease, he says, adding:“If your entire infrastructure is
only geared towards alternative classes, you may not be able to adapt as
quickly.” Photograph kindly supplied by Northern Trust, December 2008.
Seán Páircéir, managing director, Brown Brothers Harriman (BBH), in
Dublin.“BBH will continue to invest to support the sophisticated
business needs of our clients as part of our core strategy. We are
committed to enhancing our competencies with innovative technology
solutions like virtual pooling which meet and anticipate our clients’
development.” Photograph kindly supplied by Brown Brothers
Harriman, December 2008.
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