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Asset Servicing | September 4, 2024

FINDING EFFICIENCY IN A RAPIDLY GROWING MARKET

As Singapore’s asset management industry grows, the focus is on efficiency and cost-control. Outsourcing could be the key to attaining both.

Singapore’s position as a leading centre for asset management in Asia Pacific shows no signs of slowing. Singapore’s AUM grew by 10% to S$5.4trillion (or US$4.1 trillion) in 20231, outpacing AUM growth in Asia as a whole. Fueled by an influx of wealth management and family office opportunity, Singapore is poised to capitalize on further expansion.

Yet asset managers in Singapore recognize that with growth comes the need for tighter control. A recent study of 300 asset managers conducted by Northern Trust revealed that Singapore-based asset managers have identified their top strategic priorities as enhancing quality and accuracy (80%), improving the investor experience (80%), and controlling costs (60%). These findings underscore the realities of controlling a rapidly growing market, where wealth has doubled in the last six years to more than US$4 trillion2.

One way to potentially maintain a focus on efficiency and cost control is outsourcing to external providers, particularly for functions that are not core to an asset manager’s alpha-generation, like trading. By tapping into the expertise of specialized outsourcing partners, managers can help to improve the quality and accuracy of their data, better manage market and regulatory compliance, and reduce expenses. This, in turn, can lead to improved investor satisfaction and a competitive edge in the market.

Putting the Data Puzzle Pieces Together

Managers face a daunting task in managing their trade data, which can be spread across different formats and systems that don’t ‘speak’ to one another. This was supported in the study which found that, when asked about outsourcing plans for the next two years, nearly 87% aimed to focus on data management.

In addition to data management, in today’s data-driven landscape, asset managers are increasingly seeking advanced data tools to boost trade decision-making. In the study, more than 53% of asset managers in Singapore plan to leverage new technologies, such as AI, generative AI and machine learning, to address their data challenges.

This is where an outsourced trading provider can help. By outsourcing the trading function, managers have access to streamlined reporting and advanced tools, making their decision process more efficient and ultimately leading to a better experience for their clients.

Regulatory and Market Compliance

For asset managers, ensuring compliance with multiple regulations and market change – with accompanying requirements for reporting and transparency, disclosure, and risk management – is not necessarily straightforward. Furthermore, as regulations and market infrastructure across the globe continue to evolve, such as the move to T+1, updating and maintaining processes becomes challenging. This is particularly prevalent in Singapore.

This was supported by Northern Trust’s recent study, which found that 53% of asset managers in Singapore identified ‘focusing on risk/compliance’ as a strategic priority in the next two years.

Partnering with an outsourced trading provider can assist firms with managing oversight, monitoring and reporting on trade activities. Using the capabilities of a service provider’s global trading desk can also help them better manage time zone requirements and market structure changes.

Maximising Cost Efficiency

In the study a significant majority -- 80% -- of Singapore-based managers cited the cost of maintaining in-house capabilities as a top factor influencing their likelihood of outsourcing. This is not surprising, given the high expenses associated with staffing, training, and infrastructure required to support in-house trading capabilities, a key concern in Singapore where hiring and retaining skilled professionals can be costly. Moreover, the extensive infrastructure required to operate a trading desk, including hardware, software, and data analytics tools, can quickly add up, causing a significant strain on resources. When partnering with an outsourced trading provider, the onus is on the provider to stay at the forefront of technological advancements, trends, and upgrades to stay competitive.

Leveraging the Outsourced Trading Opportunity

To fully realize potential benefits from outsourced trading, asset managers must carefully select a partner that can provide high-quality support that is customized to their goals. Each asset manager's journey is unique, and that's why flexibility is crucial – there is no one-size-fits all approach when it comes to trading. By tapping into an end-to- end outsourced trading solution, managers can tap into specialized expertise, advanced technology, and data- driven insights, ultimately elevating the quality of their trading operations and better equipping themselves to navigate an increasingly complex market landscape.

Overall, outsourcing can be a game-changer for asset managers in Singapore, helping them to navigate the challenges of rapid growth while focusing on their bottom line. By delegating trading operations to external providers, managers can focus on what they do best – generating returns for their clients – while leaving the operational heavy-lifting to their outsourcing partner.

1 Singapore Asset Management Survey Report 2023.pdf (svca.org.sg)

2 Singapore's Growth as a Global Asset Management Hub - Insights by InCorp

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