The priorities of asset owners and managers across Asia are shifting in line with an ever-tougher market environment.
In the face of challenges such as cost inflation, rising rates, geopolitical tension and volatile prices, these investors are – more than ever – looking for greater efficiencies and more simplicity in how they operate.
“This is the nature of investment management in Asia generally, but pressures are building,” said Franck Dubois, head of Asia Pacific for BNP Paribas Securities Services. “There is a slowdown in growth that makes it more difficult to capture new business.”
Amid these recent dynamics, other market trends continue to impact industry players.
For example, the pace of consolidation has increased. This is notable in Australia’s superannuation sector, with various funds joining forces in quick succession, highlighting the importance of scale in becoming more efficient.
Further, the internationalisation of investment and distribution is gaining momentum, in turn creating a need from investors for support, both domestically and globally.
At the same time, settlement cycles are shortening in some markets; the US has announced plans to move to T+1 in 2024, while India has implemented its staggered approach to move to T+1.
Meanwhile, the need for accurate and consistent data, along with the need for the processes and technology to manage it, is ever-more acute – a theme that also reflects the sharper focus on ESG.
The combination of these market forces weighs on asset owners and managers – as key actors in the value chain – to adapt and evolve their platforms and processes.
Inevitably, technology is key to this. “If changes cannot be made by using new technology and straight-through processing, to create the capacity for greater efficiencies, then the cost of doing business continues to increase,” explained Dubois.
Steps are also being taken in certain markets to enhance industry infrastructure. The Australian Stock Exchange (ASX), for instance, is spearheading distributed ledger technology (DLT) for the replacement of its CHESS system.
“Approaches such as these can give investors access to information much quicker with the potential to also develop value added services on top of this data,” added Dubois.
As a custodian, BNP Paribas is ensuring it understands the technology and its potential benefits.
This can be seen from its role as a forerunner in DLT, creating real-time asset servicing apps using DAML (digital asset modelling language) smart contracts to provide clients and market participants with ready access to the new generation of DLT-based platforms and functionality.
“We have signed up as a pilot with the Hong Kong exchange (HKEX) in the prototype analysis, design and validation of a DLT solution,” said Dubois. “Project Synapse will look to reduce fail trades in a T+0 market. We will connect via a Ledger Application Programming Interface to ASX’s and HKEX’s platforms to provide our clients real-time information access.”
Further, in Australia, the firm will ring-fence data within a segregated node on the underlying ledger. “This approach will bring benefits of security, usability and portability,” he added.
BNP Paribas has also launched a first-in-market blockchain-driven solution to enhance trade lifecycle management capabilities for exchange-traded derivatives.
Another recent initiative includes creating a back-to-back FX model enabling clients to contract with an offshore branch but still receive the benefits of onshore in CNY FX instead of offshore CNY. “When applied to CIBM [China Interbank Bond Market] activity, it reduces overheads, time for investors funding trades and the benefit of onshore FX rates,” explained Dubois.
Bringing ESG into the mainstream
Having a European heritage has also enabled the firm to bring its experience and capabilities in ESG to investors in Asia.
This is timely, given that various countries in the region are issuing guidelines and steering regulatory frameworks towards international standards of disclosure on finance-related environmental and social risks.
“Clients need to qualify the ESG component of their investment portfolios, so we enable them to access this data and map their portfolios against it,” said Dubois.
To provide the type of in-depth reporting and analytics solutions to help clients to respond to disclosure requirements, BNP Paribas launched a platform called Manaos. Put simply, it connects asset owners and managers to ESG vendors, provides powerful look-through tools and can assess portfolios on a range of insights – including the ESG risk and impact scores of their investments.
More broadly, responding to these and other changing needs of investors in Asia has played into the firm’s global, integrated-bank capabilities.
Indeed, to ensure asset owners and managers can meet their own needs to source and allocate to assets internationally, such as in private markets, they need to tap into a global and a lean model, explained Dubois.
Ultimately, he added, it is in line with how BNP Paribas brings value to the market through an innovative and client-centric mind-set.
BNP Paribas Securities Services is a multi-asset servicing specialist with local expertise in 35 markets around the world and a global reach covering 90+ markets. This extensive network enables BNP Paribas to provide institutional investor clients with the connectivity and local knowledge they need to navigate change in a fast-moving world.
As of 31 March 2022, BNP Paribas Securities Services had $13.18 trillion in assets under custody, $2.69 trillion in assets under administration and 9,251 funds administered.
Call BNP Paribas on +(65) 6210 1288 or visit www.securities.cib.bnpparibas.com
Follow BNP Paribas Securities Services on LinkedIn here