Asia's top asset service providers of the year – explained
Every year, AsianInvestor's editorial team conduct an intensive analysis of the region's leading asset management service providers, fund products and asset managers, to ascertain the top organisation of each category over the previous year.
The winners of these categories must combine a mixture of business performance, growth and progress, measured on both quantitative and qualitative criteria.
Below, we detail why we chose this year's asset service provider winners. This year's winners were selected based upon detailed feedback and insights of our panels of judges, who assessed a shortlist of the entrants in each category.
This year's asset service provider awards includes a new category, for the best data and technology service provider. Read on to find out why this year's winners stood out.
Best Law Firm, Asset Management
Deacons has been quick to jump on changes to the rules in Hong Kong that make it far easier to structure open-ended and limited partnership companies, both useful to introduce alternative funds.
The law firm took advantage of these changes by introducing a strong client outreach programme, particularly focused on private equity companies and family offices in Hong Kong. These efforts proved to be fruitful, helping net it well over 100 new clients during the course of 2020.
In addition, Deacons was hired to establish Hong Kong’s first umbrella open-ended fund company (OFC), and the first such unlisted public fund to be authorised by the Securities and Futures Commission. This was followed by the law firm being appointed for numerous similar fund set-ups. It was also hired by several fund managers to establish SFC-approved environmental, social and governance (ESG) funds, or advised on existing funds transiting to become ESG funds.
Plus, the law firm advised on over 60 private fund launches during 2020, 30% higher than the previous year. Other firsts included it advising on a new entrant to the registered fund market, the listing of the first exchange-traded fund that tracks the CSI500 index; and the first ETF to invest in mainland China onshore futures.
It also advised several fund managers on business activities, helping various fund managers launch new fund products, and advised CSOP Asset Management on the first ETFs established under the Hong Kong-mainland cross listing scheme. Other advisory work conducted included fund manager acquisitions and regulatory assessments and lobbying for regulatory change, including more clarification around using external data and cloud storage providers.
Best Auditor, funds and tax
When it comes to covering Asia’s investment industry’s fund advisory and taxation auditing needs, EY stands very strong.
The business had to navigate the tricky conditions of 2020, but handled it very well. Its Asia Pacific wealth and asset management practice enjoyed more than a 10% expansion in audit and the high single-digits return in its tax business.
The company says it acts as an auditor of three out of the top 10 of Asia Pacific’s largest asset managers, while providing services to the vast majority of them. Added to that, it audits over 40% of Australia’s top retail funds and more than half of its top-10 wholesale fund managers.
EY has been ramping up its auditing of mutual funds in China too, to the point it now does so for over 2,000 of them, covering nearly all of the country’s leading asset managers by size.
All-told the firm could boast an array of new client wins during the past year, from private equity firms and hedge funds to major traditional global fund houses.
This included growing its EY legal teams, through the hiring of Nikki Bentley in Australia and Astrid Beemster, a property law expert who advises local investors about international funds that make real estate investments.
Judges were particularly impressed by the wide array of client testimonials for EY, while actively contributing to industry bodies and initiatives. The company is co-chair of the Asia Regions Fund Passport task force, for example. Meanwhile, its digital service technology WAMapps is now three years old and includes over a dozen administration firms across Asia Pacific.
Best Global Index Provider
As one of the world’s leading global index providers, MSCI has prided itself on driving new areas, and better anticipating and meeting the needs of major fund managers and asset owners. In doing so, it continues to impress.
Aside from helping to initially drive A-share inclusion into its emerging market and global indices, MSCI has also spent years ramping up its research and data gathering capabilities for environmental, social and governance (ESG) principles.
It has built up over 400 ESG professionals in its organisation who have built over 1,500 ESG indices for equity and fixed income. In May 2020 the US company celebrated the 30th anniversary of its KLD 400 Social Index, which is arguably the longest running ESG-affiliated index.
As of December 31, 2020, MSCI had recorded over a 200% year-on-year growth in assets under management that track the company’s ESG Indices. In addition, 11 of the top 15 equity ESG indices by AUM use MSCI’s underlying indices. The provider has been expanding in the fixed income space too, and in January 2020 it launched 15 ESG-related indices in the asset space to support growing investor demand.
The company also listens to its clients, and in December 2020, after a public consultation, it said its sustainable responsible investing indices would exclude fossil fuel companies, with other products shifting out of thermal coal or unconventional oil and gas activities.
Other areas it has focused on building include a new series of China Tech Indices, to meet a rising desire to get exposure to the country’s fast expanding technology space. The products were introduced in November 2020.
Best Data/Technology Services Provider
BNY Mellon Data and Analytics Solutions
As part of its broader efforts to meet fund manager and asset owners’ custody, settlement and data needs, BNY Mellon has been building out its Data and Analytics Solutions.
This cloud-based content and software service, which includes its Eagle Data Management product is designed to combine client-centric data, technology, and content capabilities. To roll it out, BNY Mellon has globally invested several billion US dollars into technology and data capabilities a year, including in artificial intelligence, machine learning, cybersecurity and business intelligence.
The data and analytics solutions is designed to help buyside firms categorise and analyse their data from varying perspectives, and then use it to better identify alpha and beta trends and patterns. It also helps investors to standardise and rationalise the information in their accounting, investment, collateralisation and performance books of record, to make it easier to assess their overall investment exposures.
BNY Mellon has been chosen by several asset owners and fund managers to offer this data service. These include the Victoria Funds Management Corporation, which chose BNY Mellon’s Eagle Data Management in December 2019 to centralise its data, offering better intelligence and analytics.
Other technology services created by BNY Mellon include Data Vault, a data platform launched in 2020 that tags and tracks data across sources, using cloud-based computing. In conjunction, it issued Data Studio, which uses Data Vault to help investors access and analyse structured and unstructured data, to better identify patterns.
Plus, the bank offers ESG Data Analytics, to support fund managers as they evolve their investment processes and decision making to better incorporate sustainability data points and processes.
Best Global Custodian for Mutual Funds
The region’s most embedded asset service provider continues to impress for its ability to combine a global and regional footprint.
Our judges noted in particular that HSBC combines its breadth with a strong market share, which it managed to improve upon during 2020. Indeed, it boasted well over 500 new mandates during last year, while its assets under custody grew by more than 20%, and its assets under administration expanded by more than 10%.
The bank could point to several ‘firsts’ in terms of service as a fund administrator, as well. These included it supporting the first Singaporean variable capital company exchange-traded fund to track the FTSE Chinese Government Bond index, and supporting all the ETFs in Hong Kong launched to track the Hang Seng Technology Index. Other notable feats included it acting as custodian for the first offshore securities lending transactions in mainland China.
HSBC was active elsewhere too, supporting 20 new fund launches in Taiwan, and taking a market share of over 50% for total foreign invested assets in the Indonesian Central Securities Depositary. Plus it helped asset managers from India, China, Hong Kong and Singapore to set up new Ucits products in Luxembourg and Ireland to be distributed to Asian clients.
The bank’s level of custody service was supported by testimonials from several key clients too. One Korean fund manager noted that the bank handled all its requests in “an efficient and timely manner”, including for operations in China, while an asset owner pointed to the fact that the organisation had helped it to navigate the RQFII investment channel into the country. Meanwhile a global asset manager complimented HSBC’s securities services arm on helped launch an array of exchange-traded funds in Hong Kong and Singapore.
Best Global Custodian for Asset Owners
As one of the world’s top custodians, BNY Mellon has been able to attract a great deal of asset owner interest over the years. And amid the volatility of 2020 the US bank’s century-long market presence in the region and its endurance worked in its favour.
Across the year, BNY Mellon saw its assets under custody from regional asset owners rise by over 20%, and it also retained every single existing client. It particularly gained additional business from several central banks across the region, being appointed to several internally managed portfolios of the institutions.
In addition, it was appointed to oversee additional US Treasury and European bond custody from a Japanese asset owner client.
The US institution also worked during Covid-19 to centralise its client coverage and better share information among client-facing teams, as well as creating a hotline for asset owners to quickly communicate with BNY Mellon’s client coverage and support teams.
It continues to heavily invest into technology too, spending several billion dollars to ensure its capabilities are constantly being upgraded to meet changing market and client needs (see Data/Technology Services Provider award for more details).
Best Bank for Cross Border Custody
The global reach and strength of HSBC holds – it has 96 markets in its global custody network and a further 38 in its proprietary sub-custody level – offer it a breadth that few of its rivals can compete with when it comes to cross border custody.
Our judges noted that the bank has an overall impressive level of performance across its areas, scoring particularly well on key improvements to its operations and expanding or introducing new custody and associated services.
One judge particularly noted that Project Hash was a notable innovation. The distributor ledger technology-enabled platform was conducted by HSBC in collaboration with Singapore Exchange and Temasek Holdings, to help support the issuance and servicing of tokenised fixed income securities.
This led to the first digital bond issue on the platform on September 1, 2020, by Olam International, and could well be followed by others in a process that is far more streamlined than most traditional bond formats and could be settled far quicker. HSBC, needless to say, acts as the arranger, settler and custodian bank for the platform.
HSBC’s cross-border custody business continued to enjoy strong growth, too. It enjoyed well over 500 new mandates and serviced far above 100 million transactions, almost double the amount it had conducted the previous year. The bank saw its assets under custody rise by over 20% in Asia alone, underlining its reliability and appeal in a difficult year. And it did so while shifting 80% of its workforce to operate remotely, no easy feat in such a large organisation.
This included ongoing growth of assets under custody in China as a sub-custody provider in cross-border transactions, which grew in part from it helping facilitate some debut short-selling transactions under the RQFII and QFII schemes in mainland China.
Other wins including HSBC being mandated by another global custodian to act as its provider in India and South Korea, which it gained in part through the strength of its international custody approach. The mandate secured tens of billions of dollars in assets under custody.