Bigger isn’t always better when it comes to member services. Megafunds might be able to mass customise, but when you’ve got two million members it’s tough to bring the personal touch.
The famous and closely watched US endowment model took a hit in FY23, with smaller, equity-heavy investors taking the lead. But the longer-term superiority of a chunkier exposure to alternatives remains unchallenged.
It’s now all about data: how State Street is adapting
As back-office providers to fund managers and pension funds provide more and more services in the middle and front office areas, the question of data quality and delivery is growing in importance. Jeff Conway, the State Street asset servicing veteran, says the term “outsourcing” needs to be replaced.
Addressing the IO&C conference in Shanghai last week, Conway, who was appointed last month to head up State Street’s new Global Exchange division – the fourth pillar of the company – asked the following questions:
. “The internalization of investment management is a global trend – when do the benefits outweigh the costs for a manager?
. “The explosion of data and the need for more sophisticated data and analytical insights (alpha generation, trading strategies, loss prevention) are driving increased complexity. What techniques are you using to incorporate real-time data and insights to manage risk and generate alpha?Â
. “Assets continue to flow into opaque alternatives in search of returns. How do you get the transparency and analytics to provide comfort in your allocations?
. “Regulatory changes are creating increased compliance and capital adequacy requirements and rapidly evolving markets structures (e.g. central clearing). How do you ensure compliance in a dynamic regulatory environment?
. “The digitalization of markets is an ongoing trends. How should firms play in an increasingly electronified market to minimize trading and operating costs?”
State Street has set up Global Exchange to gather in under one roof a number of data-generating parts of the business. It complements the other three pillars of asset servicing, funds management and foreign exchange and transactions services.
Addressing the industry trends, Conway said: State Street would launch the next generation of fixed income and derivative execution and clearing services; provide new benchmarks and indices, and an analytics platform with each becoming the industry standard; be a market innovator and leader for integrated analytic solutions across multiple asset classes with a focus on portfolio construction and risk; leverage State Street Associates’ innovation and the STT Digital Enterprise to develop timely benchmarks, indices, insight, and information products.
