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Global Regulatory Juggernaut Continues To Drive Outsourcing Trend - Cerulli

Tom Burroughes, Group Editor , London, 20 February 2014

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A widely contrasting array of global financial regulations are nevertheless encouraging firms such as fund houses to outsource the same kind of chore, such as documentation, as the volume of red tape forces change, according to Cerulli Associates, the consultants.

A widely contrasting array of global financial regulations are nevertheless encouraging firms such as fund houses to outsource chores, such as documentation, as the volume of red tape forces change, according to [tag|Cerulli Associates|]Cerulli Associates[/tag], the consultants.

Regulation is pushing more groups to outsource key functions, but the direction is not all one way. Others are outsourcing operations to fund managers too. Discretionary portfolio managers will benefit as commission-based models crumble, according to the latest edition of The Cerulli Edge-Europe Edition.

"What is remarkable about our regulation survey findings is the consistency of what is being outsourced most for different bits of legislation," Angelos Gousios, a Cerulli senior analyst, said. He talked about developments such as the MiFID directive on markets in the European Union, or the EU’s Alternative Investment Fund Managers Directive, the EU’s Solvency II capital rules on insurers, and the US FATCA Act enforcing rules on expat US citizens.

"The AIFMD is very different to EMIR, FATCA (not even a European set of rules), or MiFID II, but updating technology and document production (those key information documents) are the functions most likely to be outsourced. [EU] Solvency II produces slightly different results, with the sheer volume of data needed to be sent to insurers skewing results,” Gousios said.

Cerulli argued that “fund managers are there to manage funds, not run servers or decide whether to upgrade to Windows 8. Likewise, producing monthly fact sheets in multiple languages in a timely fashion is something that can and should be farmed out to a KIID (Key Investor Information Document) factory that can do it at a fraction of the cost of employing a European Commission-sized writing team in-house”.

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