Asset managers need to simplify their biz model: State Street chief2 min read . Updated: 09 Nov 2018, 09:44 AM IST
Digitization will speed up processes for asset managers, says State Street Corp.'s India head Michael Brager
Mumbai: State Street Corp. president and chief operating officer Ronald P. O’Hanley and India country head and senior vice-president Michael Brager comment on the challenges before asset managers in today’s macroeconomic environment, how digitization is changing asset management, and the company’s plans in India. State Street Corp is a one of the world’s largest providers of financial services to institutional investors including investment servicing, investment management and investment research and trading with $2.8 trillion in assets under management. Edited excerpts from an interview:
What are the top challenges asset managers are facing in the current global macroeconomic context?
O’Hanley: We have these conversations with asset managers every day and their challenges are several-fold. The key thing is performance and value, particularly for active asset managers. Are they performing and generating enough alpha to justify the price they are charging over passive managers. The active to passive shift has put a lot of pressure on active asset managers. So that’s challenge number one.
Challenge number two is that the operations of asset management firms are very complex. They have lots of different systems internally, most of which are subscale and manual; they need to simplify their business model in order to reduce their costs and to be able to actually grow. We can help them a lot here.
The third challenge is that they are facing new regulations around the world. Banks got regulated quickly after the (2008) global financial crisis; it’s only more recently that regulators have turned their attention to the asset managers and these regulations are an expense challenge for asset managers.
How are asset managers adapting to digitization? Is it a big opportunity for you?
Brager: Lots of opportunities. We think there is a way to digitize processes from front office to back office operations. For example, how we capture rich data, how we use data to solve problems in different ways. Digitization will speed up processes and propel us into the future.
O’Hanley: We are an asset manager, but our larger business is serving other asset managers. Asset managers are trying to digitize. To achieve scale and reduce complexities, they are looking to us to help them do that. In fact, they are increasingly outsourcing more activities to us and looking to us to enable them to grow. So our digitization is not just for ourselves but to enable our clients, who are other large asset managers, to grow with their clients.
How important is India to your overall business?
O’Hanley: We increasingly view India as a “global hub"—it is the centre for a lot of important work we do. State Street’s products to its clients are in fact its operations; we do all the very sophisticated and complex operations and deliver to clients at the end of day, month and quarter. And increasingly that work is conducted in India, increasingly the innovation around the work is coming out of India. . We have lots of employees here and increasingly we see them a source for a lot of new managers for us.
We think of India as a co-equal location with all other locations at State Street, so as we expand we will think where is the right place for the work and that is determined by where the talent is.
We are very proud of the talent we have in India, we have grown that talent base dramatically. We expect to see a lot of activities in India. It is very important to our business and we will continue to grow in India as the company grows.