Fullerton’s Plein talks building a lean, nimble fund house
Regulatory changes to the financial industry have been coming thick and fast since the global financial crisis of 2008. Jeff Plein has been actively responding to them.
The chief operating officer (COO) of Fullerton Fund Management was named AsianInvestor’s COO of the Year this year, in part for his part in advocating for universal know your customer (KYC) compliance and reporting standards.
An industry veteran, Plein worked as head of operations in Asia Pacific for BlackRock for eight years before joining Fullerton in 2014. He is also a fluent Japanese speaker, and worked at Pimco for four years in Japan.
Plein spoke to AsianInvestor a few weeks before we broke the news that Singapore insurer NTUC Income was merging with Fullerton. During the interview, he discussed the ways the COO role at fund houses has evolved, and future opportunities and challenges.
Q How has the role of COO at fund houses changed over the past five years?
I see the role increasingly helping the firm to manage its enterprise risk. There are increased regulations and scrutiny from regulators, which although important in protecting the investors does create additional stress on an organisation. Meeting these regulatory requirements as well as the day-to-day operating risks … requires a comprehensive understanding of both the investment life cycle and client life cycle.
As a global asset management company you are not only required to comply with your own jurisdiction but where you are selling products, investments and securities, and where you have offices. It’s not just the legal team interpreting the regulations; in many cases it’s the client service folks who must be knowledgeable and compliant with them.
Plus it’s the systems that need to be set up to make sure that we can institutionalise the various rules from an automation perspective, and demonstrate that we are being compliant with those rules.
Q How can a COO help improve a fund manager’s business?
Our firm’s job is to generate alpha on behalf of the investors … [but] we should also be focused on generating ‘non-investment alpha’.
We try to enable the firm to focus on investing and servicing the clients. We do that through a portfolio management perspective, where we focus on making sure the clients have the data and technology and access to markets to invest if and when they need to. We try to keep the administrative aspects away from them.
Second, we focus on minimising the operational burden on our business development and the client service teams so they can focus on building assets and servicing them. One way we have done that is to redirect the KYC process away from business development where we can, although they must be frontline from a regulatory perspective. We try to make it easier for the team to execute.
Thirdly, we ensure the governance and organisational structures are transparent and providing efficient and accountable decision-making, to keep the firm nimble and efficient and minimise bureaucracy and expedite decision-making.
Q I understand you have been encouraging a standardised KYC platform in financial services.
Digitising and streamlining and standardising the KYC process across financial services can greatly minimise the burden on client onboarding and greatly improve the client experience. There’s no question the AML [anti-money-laundering] reviews are very important, but how we administer those is also important. So we are trying to encourage the industry to join together through an industry portal. Because all of the managers are doing the exact same thing with many of the same clients, and the cost of doing this from a KYC compliance perspective is increasingly becoming a concern.
From my understanding there is currently a proof of concept on the portal for the banking industry being run by three Singaporean and two international banks. The banking industry has a bigger KYC challenge than the asset management industry but we hope the asset management voice will be heard after the banks determine their direction.
There are approximately 20 asset managers interested in putting together a view for the industry. I committed to work on this for 12 months and it took us eight months to develop a white paper that we shared with the IMAS (Investment Management Association of Singapore) in the first quarter.
Q What are the biggest challenges facing Fullerton over the next five years?
From a company perspective there are four. First, there are increasing regulations over multiple jurisdictions and how to harmonise these regulations without impeding our business will continue to be a challenge over the coming years.
Second is the downward pressure on fees. This is an increasingly crowded industry and…together with the proliferation of lower fee products it will continue to add margin pressure, which affects smaller firms like Fullerton especially. We need to continue running an efficient business while focusing on real active management that provides value to investors, particularly in terms of downside risk management.
Third, we need to continue offering diversified products to play to our strengths as an Asian specialist, but also solutions that meet our product requirements. We are also looking at multi-asset solutions and absolute return strategies.
And fourth as we look across borders to new markets, brand building is a challenge, [especially] around strategic communications in the digital area. We need to think of ways to get our message across to the right audience.
This interview is taken from AI's August/September print edition, in which Plein also addressed Fullerton's ambitions for China.