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October 13, 2014 at 09:39 AM
Boutique asset management firms across the global are under pressure, and it is only increasing.
A survey released Monday by TABB Group found that 42% of respondents said regulation was the chief make-or-break factor for their firm, up from 17% who said this in 2013, and compared with 17% who named cost of operations as the critical factor that could undo their firm.
TABB conducted the survey at the request of SunGard in May with more than 100 participants, concentrated in the U.S. and Europe, but with a third representing emerging markets and Canada. Forty-eight percent of respondents were boutiques, and 32% institutional investors that traded global products.
Boutiques were most concerned about the overall effect of the Dodd-Frank Act, with 20% reporting high concern, 45% moderate concern and 35% low concern.
Respondents also fretted about new regulations cropping up around the world.
Indeed, regulatory worries have shifted from the U.S. under Dodd-Frank last year to Europe in 2014, with both the E.U.’s financial transaction tax and the Markets in Financial Instruments Directive raising the biggest concerns over the next 12 to 18 months.
The FTT was worrisome to 24% of boutiques, up from 17% in 2013. The FTT is a levy on a specific type of monetary transaction for a particular purpose, and is most commonly associated with the financial sector.
MiFID saw a big jump in concern, from 8% of participants in last year’s survey to 22% in the current one.
MiFID imposes conduct of business and organizational requirements for investment firms, authorization requirements for regulated markets, regulatory reporting to avoid market abuse, trade transparency obligation for shares and rules on the admission of financial instruments to trading.
Some new areas of regulatory concern are just emerging, with their effects remaining to be seen. For example, the U.K.’s Financial Conduct Authority is about to alter the method of paying for research through client commissions. Many survey respondents were undecided as to how this would affect their firm.
According to the study, investors see technology as the critical solution to meet regulatory compliance, limit risk exposure and manage existing resources more effectively.
