The Every Fund Survey 2016

Transcription

1 The Every Fund Survey 2016 A triple whammy for the asset management industry market turmoil, regulation and threat of disruption

2 Executive summary $27trn total AUM $19trn total AUA 125 survey respondents This year s Every Fund annual survey looks beyond the scope of regulation and the impact of the AIFMD regulatory initiative, the subject of our previous annual surveys. This latest survey has been conducted in a less stable market environment than previous years and widens our research to examine the factors presenting the challenges and opportunities for the asset management industry in looks set to present the asset management industry with one of its biggest challenges a triple whammy of market turmoil and increased volatility, a tsunami of regulation and a threat from disruptors that is greater than ever before. To cope with the looming triple whammy, the industry needs to adapt this survey examines some of the key factors and potential blocks in this evolutionary journey. This survey was carried out in March 2016 and received 125 responses from the global asset management industry, including global custodians/fund administrators (30%), asset managers (17%), third-party administrators (24%) and insurance companies (2%) with regulators, consultants and law firms accounting for the remaining respondents (27%) and a mix of both traditional and alternative funds, including mutual funds, money market funds, hedge funds, ETFs, real estate, private equity, insurance, pension funds, unit trusts and retail funds. Key findings The biggest barrier to entry for disruptors entering the industry is regulation (74% of respondents) followed by back-office complexity (37% of respondents) Changes to technology systems (47% of respondents) alongside volume of reporting are the most concerning challenges of regulation 51% believe that MiFID II is the regulation causing most concern Nearly a quarter (24%) still rely on manual contingency measures or have no contingency plan in the event of system failure More than half (54%) agreed that a new game-changing disruptor, such as Amazon or Google, will enter the market in the next two years The biggest impact from regulation (64%) is increased costs to investors, rated higher than investor protection (58%) or increased transparency (54%) 22% of respondents (who specified) spend between 20 and 50% of their overall IT budget on regulatory compliance 73% of respondents (who specified) believe that regulation has led to a decrease in the popularity of MMFs

3 A triple whammy for the asset management industry market turmoil, regulation and threat of disruption Market turmoil and increased volatility Turbulent markets make for uncertain times for both investors and fund managers which impacts performance and this, along with volatility, dents the confidence of both institutional and retail investors. Statistics from the Investment Association showed that a total of 463m was redeemed from funds in January 2016, the most since October 2008, as investors became increasingly unsettled by stock market volatility and concerns over the global economy. In such an environment, fund managers face uncertainty in terms of revenue and growth on one side and the continued and rising costs from regulatory compliance and operational complexity on the other. While the industry is seeking to reduce costs and increase efficiency, regulation seems to be pulling industry participants in the opposite direction. Of the respondents who specified cost levels, 64% have seen their costs rise over the last 12 months and not by insignificant levels. 22% of respondents are spending between 20 and 50% of their IT budget complying with regulations and a further 7% are spending more than half of their budget. Unsurprisingly, the strain on the industry is ever increasing as it tries to rely on its complex middle and back office systems to deliver the requirements of regulators. Having to change technology systems to make them compliant is the most substantial challenge faced by respondents. Challenges of regulatory compliance As a result, we see fund managers increasingly focusing on their core competencies of investment management and distribution and outsourcing their operational capabilities in order to reduce operating costs, increase efficiency and automation and deal with regulatory cost effectively. Technology system changes Volume of reporting to regulators Ambiguity in regulatory specifications 47.2% 47.2% 42.4% The tsunami of regulation continues to act as a drag on the industry Regulation has been a perennial concern for our survey respondents the challenge of regulatory compliance has been one of the industry s biggest burdens since the financial crisis. This year is no different. The list of regulations challenging our asset management industry respondents is ever growing. Respondents put MiFID II and UCITS V at the top of their most concerned list, but the spread of responses across all regulations reflects the breadth of regulatory initiatives they face. It seems that none are without their challenges, whether that be AIFMD, Solvency II, Money Market Fund reforms, OECD Common Reporting Standard, Swing Pricing, Dodd-Frank, T2S, FATCA, RDR and PRIPS or local tax changes. Regulations causing most concern MiFID II UCITS V AIFMD Solvency II Money Market Fund reforms OECD CRS FATCA Dodd-Frank Swing Pricing Local tax changes RDR and PRIPS T2S 51.2% 44.8% 31.2% 23.2% 22.4% 20.8% 20.0% 17.6% 16.0% 15.2% 14.4% 12.8% Operational changes Availability of compliance expertise Lack of co-ordination between regulators Conflicting requirements between regulations Different reporting templates for countries/jurisdictions Changing regulatory deadlines 40.8% 25.6% 24.8% 21.6% 20.8% 18.4% They ranked this, along with volume of reporting, higher than any other issue, including operational changes, different reporting templates, regulatory deadlines, ambiguity in regulations, conflicting requirements and co-ordination between regulators. And yet despite this system dependency, nearly a quarter (24%) still rely on some manual contingency measures or have no contingency plans in the event of system failure. MULTIFONDS The Every Fund Survey

4 It s not only the asset managers and their service providers who are feeling the pressure of regulation the survey points to the fact that the costs are being passed on to investors. Respondents overwhelmingly agreed (64%) that the biggest impact of regulation is increased costs for investors, above and beyond any perceived regulatory benefits, although better investor protection and increased transparency followed in second and third place respectively. However, only 30% agreed that regulation better positions the industry to identify systemic threats/ trends; this is on a par with last year s results where only 23% agreed the same. To ease and improve the regulatory burden, respondents voted loud and clear for more co operation between regulators. The threat of disruption is greater than ever before Many other industries have already been shaken by the entry of game-changing disruptors; whereas banking and the asset management industry in particular has been most resistant to disruption and not been significantly impacted as yet. The key things that disruptors look for in an industry are inefficiencies and a high cost of manufacturing and distribution these are all currently present across the asset management industry. As has been shown in other industries, game-changing new disruptors are the ones that find ways to exploit inefficiencies in mature markets. The survey suggests that this may now be changing and the threat of disruption is greater than ever before, as fears grow within the industry that disruptive, game-changing new players will enter and exploit its current inefficiencies. More than half (54%) of respondents agreed that a new game-changing disruptor will enter the market in the next two years. Threat from a new disruptor within two years Strongly agree Partly agree Partly disagree Strongly disagree Don t know 3.2% 25.6% 16.8% 12.0% 42.4% Disruption could originate from a number of angles: from an existing brand outside of the industry such as an Amazon or Google leveraging their wide scale global presence or the likes of Alibaba who have made advances in Asia already, to a new fintech entrant (such as robo advisers), or a new game-changing technology such as blockchain that creates a step change of new efficiencies in the processing model. Big data analytics and blockchain were identified in the survey as the area s most susceptible to disruption in the asset management industry, specified by 43% and 42% of respondents respectively. So why has the asset management industry been so slow on the uptake to date? The survey results highlight regulation and back-office complexity as the major contributing factors. A significant 74% specified regulation as the main barrier to entry for disruptors, followed by 37% who highlighted back-office complexity. The asset management industry is a highly regulated industry and it could be this regulation that is the deciding factor in how quickly and widely disruption occurs. However, if the industry doesn t evolve, then someone else will eventually step in. Unless the industry itself creates greater automation, improves efficiency and reduces costs, a game-changing disruptor could soon realize that they have the reach and opportunity to do it themselves and exploit the current inefficiencies. Evolving the asset management industry innovation versus regulation Appropriate and innovative investment products can also be a positive force for disruption in their own right Exchange Traded Funds (ETFs) are a good example. ETFs have delivered an investment solution that met a market need and, as a result, have seen success and growth over the last two decades. Lower costs seem to be the main reason behind their success. In the survey, a huge 69% specified lower costs as the highest ranked explanation of their popularity. The introduction of ETFs is a good example of the innovation and creativity needed in the asset management industry. The industry must be careful not to stymie such innovation by over regulating new emerging products. For example, in 2014 the SEC introduced a set of changes for the governance of money market funds (MMF). The survey examined the impact of this new regulation on MMFs. Of the respondents who expressed a view, 73% believe that the regulation has resulted in the decrease in popularity for MMFs. Such regulation could be in danger of killing innovation before new products even reach the market. 2 MULTIFONDS The Every Fund Survey 2016

5 Survey findings A tsunami of regulation This year s annual survey widens the scope beyond the AIFMD regulatory initiative of previous surveys to consider the broader impact of regulation on the asset management industry. The two years since implementation appear to have cemented AIFMD as a global brand on a par with UCITS and the industry now moves to consider to its second iteration, AIFMD II. In 2015, 93% of survey respondents who expressed an opinion believed AIFMD would become a global brand and this year s survey displays a similar optimism for success with 94% agreeing. Will AIFMD become a global brand? The impact of regulation Increases costs to investors Better investor protection Increases transparency Reduces diversity of funds Enables regulators to better identify systemic trends/events Stifles innovation 64.0% 58.4% 54.4% 30.4% 30.4% 26.4% Yes No Kills the industry 14.4% % 6.3% 93.1% 6.9% 71.7% 28.3% 80.8% 19.2% IFMD is just a part of the bigger regulatory picture today though; one of a long list of regulations presenting challenges to industry participants. This year, respondents were asked to select their top three regulations which will give them most cause for concern in the next 12 months. MiFID II dominated and was placed in the top three by 51% of respondents, UCITS V was next, specified by 45%, and then AIFMD followed with 31%. The next closest were Solvency II, Money Market Fund reforms and OECD CRS, with 23%, 22% and 21% respectively. Interestingly, the spread of responses across all regulations reflects the breadth of regulatory initiatives they face. It seems that none are without their challenges, whether that be AIFMD, Solvency II, Money Market Fund reforms, OECD Common Reporting Standard, Swing Pricing, Dodd-Frank, T2S, FATCA, RDR and PRIPS or local tax changes. The asset management industry has definitely been the target of regulators as they seek to better protect investors following the financial crisis; but are the regulations achieving this goal? The survey asked what impact regulation is having on the asset management industry. Respondents overwhelmingly agreed that the biggest impact is actually increased costs for investors, with this being placed in the top three by 80 respondents (64%), above any perceived protection or benefits to investors. However, this was closely followed by better investor protection with 73 respondents (58%) and increased transparency with 68 (54%). Eliminates poor performing funds 11.2% However, respondents still don t believe that regulation positions the industry to better identify systemic threats/ trends with only 30% specifying this. This is consistent with last year s survey where less than a quarter (23%) specified the same. That may throw serious doubt on the industry s view that regulation plays an important role in preventing market instability and build-up of systemic risk. The cost of regulation Regulation is proving to be a more costly business for the asset managers and their service providers too; regulation may be better protecting the industry, but it comes with additional costs. Of the respondents who specified cost levels, 64% have seen their costs rise over the last 12 months. A significant proportion of their IT budgets are consumed by regulatory compliance and implementation. Only 68 respondents were able to comment on the percentage of their IT costs spent on regulatory compliance, but of those, the majority (68%) stated that more than 10% of their IT costs are now consumed with regulation. 22% of respondents are spending between 20% and 50% of their overall IT costs on regulation and 7% are spending more than 50%. Percentage of IT costs spent on regulation Less than 5% Between 5% and 10% Between 10% and 20% Between 20% and 50% More than 50% 22.1% 7.3% 5.9% 26.5% 38.2% MULTIFONDS The Every Fund Survey

6 Despite regulators best efforts, the regulatory agenda has a great deal of variability between the regulatory initiatives themselves and different interpretations, rules and implementations by local jurisdictions of the same regulation. For asset managers operating in multiple domiciles, the regulatory agenda presents significant challenges. The survey asked what respondents would do to ease and improve the regulatory process. They voted loud and clear for more co-operation between regulators (63%) followed by wider consultation between regulators and participants (42%). Improving the regulatory process More co-operation between global regulators Wider consultation between regulators and participants Central data collection point across countries/jurisdictions Regulatory body to identify overlaps and inconsistencies between regulations Better support from technology vendors Less regulation Other 63.2% 41.6% 36.8% 30.4% 28.0% 24.8% 0.8% Last year s survey uncovered doubt about what regulators would do with all the information that had been collected. 56% of respondents then remained unclear on how regulators would use and apply the data they received from participants. There had been talk within the industry of a centralized hub or utility that would help national regulators keep a check on systemic risk and share information gathered from managers. 37% of respondents this year agreed that a central data collection point across countries/ jurisdictions would help improve the process. Making technology compliant While the respondents believe further harmonization across regulations and between regulators and participants would improve the regulatory process, they have more pressing immediate concerns to address. The strain on the complexity of systems in the middle and back office is beginning to show. Beyond any other aspect of regulation, changing technology systems to make them compliant is the most substantial challenge faced by respondents. The survey asked which challenge they were most concerned about and technology system changes was the highest placed; being placed in the top three by 47% of respondents alongside volume of reporting also receiving 47%. After these two, the most concerning challenges were ambiguity in regulatory specifications and operational changes with 42% and 41% respectively. All of these ranked more highly than others which included: operational changes, different reporting templates, regulatory deadlines, conflicting requirements and co-ordination between regulators. The challenges from regulation Technology system changes Volume of reporting to regulators Ambiguity in regulatory specifications Operational changes Availability of compliance expertise Lack of co-ordination between regulators Conflicting requirements between regulations Different reporting templates for countries/jurisdictions Changing regulatory deadlines Making technology resilient 47.2% 47.2% 42.4% 40.8% 25.6% 24.8% 21.6% 20.8% 18.4% Industry participants often have multiple systems in the middle and back office for different regions, asset classes and fund types which are increasingly uneconomic to maintain, exacerbated by the unprecedented levels of new regulation. The reliability and availability of this technology is of paramount importance for organizations today; a number of high profile system failures and the resulting downtime and penalties have made this an industry issue. The survey asked respondents what kinds of contingency plan they have in place to counter system failure, such as security breaches, to which respondents selected as many as applied. The majority of respondents (67%) rely on internal failover/disaster recovery in the event of system failure, such as in the case of a security breach. A further 35% rely upon their third-party service providers disaster recovery, and 12% have shadow book keeping as a failsafe. However, nearly a quarter (24%), still rely on some manual contingency measures or have no contingency plans. Contingency plans Shadow book keeping Internal failover/disaster recovery Reliant on service providers disaster recovery Manual contingency None Don t know Other 12.0% 67.2% 35.2% 22.4% 1.6% 12.8% 1.6% 4 MULTIFONDS The Every Fund Survey 2016

7 Threat of disruption The threat of disruption in the asset management industry appears to be greater than ever before, however to date asset management has been relatively immune to the game-changing disruption that has impacted many other industries. The survey considered why this may be the case for the asset management industry specifically. Respondents were asked to select the main entry barriers for a disruptor potentially entering the industry, from appropriate investment products, appropriate channels, lack of automation, back-office complexity and regulation. Respondents selected as many as applied and a significant 74% specified regulation as the main barrier, followed by 37% who specified back-office complexity. Disruptor barriers to entry Regulation Back-office complexity Appropriate investment products Appropriate channels Lack of automation Other 74.4% 36.8% 24.0% 23.2% 13.6% 4.8% The asset management industry is a highly regulated industry so it is unsurprising perhaps that this has been one of the main deterrents for potential new entrants. It could also end up being the deciding factor in how quickly and widely disruption occurs going forward. The time is right However, the survey suggests that this may now be changing and the threat of disruption is greater than ever before, as fears grow within the industry that disruptive, gamechanging new players will enter the industry and exploit its current inefficiencies. More than half (54%) of respondents agreed that a new game-changing disruptor will enter the market in the next two years. Just over a quarter of respondents (29%) disagreed. So what has changed to make the industry a likely candidate for disruption in 2016/17? According to BCG, as specified recently in The Economist, profit margins in the asset management industry were 39% in 2014, compared with 8% in consumer goods and 20% in pharmaceuticals. The industry s global profits in 2014 were an estimated $102 billion, allowing firms to pay those picking stocks in the American equity market an average salary of $690,000 per year. Better yet, asset management is growing fast: the industry looks after $78 trillion worldwide, and could shepherd over $100 trillion by Underperformance by active managers, downward pressure on fees, outflows from active funds and regulatory pressures to provide more transparency makes the industry a more attractive target for potential disruptors and provides an opportunity to re-write the business model with technology being leveraged to a far greater extent. The key things that disruptors look for in an industry are inefficiencies and a high cost of manufacture and distribution these are all currently present across the asset management industry. As has been shown in other industries, game-changing new disruptors are the ones that find ways to exploit inefficiencies in mature markets. Where the impact will be greatest Disruption could come in a number of forms, some of which may come from innovation within the industry and be beneficial to existing players capitalizing on new opportunities such as blockchain; although unproven to date in a regulated and high volume environment. It could also come from an existing brand outside of the industry, such as an Amazon or Google, leveraging their wide scale global presence to change the current business model and potentially de-throne some of the existing, traditional players. Robo-advisers are a good example of disruptors which have achieved success. First introduced in 2008, they offer an automated, low-cost alternative to active management at a fraction of the fees, especially attractive to the younger and middle age investors. The robo-adviser industry is growing rapidly. As reported by Bloomberg News using statistics from consultancy AT Kearney: The automated investment platforms industry has seen dramatic growth, from almost zero in 2012 to a projected $300 billion in assets under management at the end of next year (2017). This year alone, Betterment almost tripled its assets to $3 billion. Roboadvisers could manage $2.2 trillion by Robo-advisers are just one potential channel of disruption. The survey questioned which would be the areas that see the biggest impact from fintech disruption. Big data analytics and blockchain came out on top; 43% selected big data analytics and 42% selected blockchain. Areas where disruptors will impact most Big data analytics Blockchain Distribution channels Cybersecurity AML/KYC Robo advice Social media Investment research Industry utilities Other 43.2% 41.6% 38.4% 28.0% 25.6% 22.4% 19.2% 9.6% 8.0% 1.6% MULTIFONDS The Every Fund Survey

8 Every fund The asset management landscape is shifting. The financial crisis brought about a huge influx of regulation that has added considerable pressure and increased scrutiny putting asset management into the spotlight. The investor demands and expectations are changing and the next generation of investors is now influencing the market; growth in passive investments such as ETFs, alternatives becoming more normal (the last ten years has seen this category of assets double in size), pressure on fee models to change, new distribution channels for delivering products and new market entrants with innovative technology. Convergence For over a decade now, the continued trend of convergence between long only funds and alternative structures such as hedge funds, private equity and real estate funds has been gaining momentum and has been the focus of previous years surveys. This convergence is now front and centre for asset managers as well as service providers, perpetuated by the changing expectations of institutional and retail investors, combined with evolving regulation. This accelerating convergence has resulted in alternative funds becoming more traditional in nature with daily liquidity, higher numbers of investors, higher trading volumes and distribution networks, and associated commissions. Conversely, long only funds have now developed alternative characteristics such as complex instruments like derivatives and OTCs, as well as performance fees, equalization, complex master feeder structures, and side pockets. In this year s survey, 92% of respondents, who expressed an opinion, agreed that the convergence of traditional and alternative funds will continue, displaying similar results to previous years where 90% (2015), 81% (2014), 88% (2013) and 92% (2012) of respondents agreed. Convergence of traditional and alternative funds Agree Disagree % 8.4% % 9.8% % 18.6% % 11.7% % 8.3% As a result of this convergence, we are seeing a polarization between the very large top tier brands particularly in the passive space with ETFs and the other end of the spectrum of niche funds, which are performing well and achieving success with specialized strategies. Spotlight on ETFs Appropriate and innovative investment products can also be a positive force for disruption in their own right Exchange Traded Funds (ETFs) and the rise of smart beta and passive ETFs with a twist are good examples. ETFs have delivered an investment solution that meets a market need and, as a result, have seen success and growth over the last two decades. The survey questioned why ETFs have enjoyed such a rise in popularity, with lower costs highlighted as the main reason behind their increased popularity. Respondents selected as many as applied and a huge 69% specified lower costs, 29% ahead of the next closest ranking reason of better liquidity with 40%. The rise in ETFs popularity Lower costs Better liquidity Online distribution channels Outperformance against market returns Innovative products such as smart beta, active ETFs Reduced risk New product entrants from established brands Regulatory changes such as RDR Other 68.8% 40.0% 23.2% 17.6% 16.8% 14.4% 11.2% 7.2% 2.4% The traditional ETF market continues to be dominated by three major brands, but the smart beta market is far more diverse and offers more opportunities for new entrants. According to Morningstar, as reported in the Financial Times in February 2016, The total US ETF industry stands at about $1.7tn and smart beta products now account for well over a fifth of that up from 14 per cent five years ago after three straight years of $60bn plus inflows, and there are only 11 smart beta ETFs with assets of over $10bn. ETFs as a whole have seen considerable success. Standing on the success of this larger ETF evolution, smart-beta ETFs have shone in recent years and continued to gain momentum, particularly in the institutional market. As yet, ETFs have not been the target of regulation, although The Securities and Exchange Commission (SEC) recently announced that it would begin looking into ETF sales strategies and disclosures, and the suitability for investors of complex products like leveraged and inverse ETFs. Regulation appears to have had a detrimental effect on the popularity of other fund types. Will regulation come to have a similar effect on ETFs? At the moment, business is booming for smart beta ETFs; the industry should take care not to stymie such innovation by over regulating. 6 MULTIFONDS The Every Fund Survey 2016

9 Spotlight on money market funds One such example of how regulation can impact is the effect of the Money Market Fund (MMF) reforms. In 2014, the SEC in the US introduced a set of changes for the governance of MMFs in response to the financial crisis in Europe and China are now expected to follow with similar changes. MMFs have been a popular vehicle since their introduction in 1971 in the US and currently hold more than $2.8trn in assets, the majority of which is in institutional funds. The reforms look likely to make this a far less attractive option for investors and recent years have already seen outflows from MMFs. 51% of respondents in the survey agreed that the regulatory changes have decreased the popularity of MMFs, with only 19% disagreeing. Of the respondents who did express an opinion, 73% believe that the regulation has resulted in the decrease in popularity for MMFs. Have MMF reforms decreased their popularity? Strongly agree Partly agree Partly disagree Strongly disagree Don t know 29.6% 3.2% 11.2% 40.0% Elements of MMF reforms which have the largest operational impact Floating NAV/Intraday pricing Ad-hoc liquidity fees Temporary redemption gates Portfolio diversification analysis Stress testing Disclosure requirements Don t know 38.4% 18.4% 15.2% 13.6% 17.6% 13.6% 38.4% Consistent with other survey findings, the move towards intraday pricing creates new challenges for fund operations; they require changes to their back-office fund administration systems to ensure their ability to handle these changes. The majority of respondents were not able to comment on their preparedness for the MMF reforms this year, but of those who did, 74% are already fully prepared or will be ready by the April and October deadlines. 26% said they are not ready, but have a project initiated. 16.0% The SEC issued amendments to rules intended to mitigate the risks associated with potential runs on MMFs. These rules introduce the requirement for a floating Net Asset Value (NAV) for institutional prime money market funds, and allow MMFs to impose liquidity fees or temporarily suspend redemptions if liquidity falls below a certain threshold. The survey questioned which of the changes imposed by the reforms will cause them the biggest challenge. The floating NAV/intraday pricing element of the regulation was highlighted by 38% of respondents as expecting to have the largest operational impact, followed by ad-hoc liquidity fees with 18%. MULTIFONDS The Every Fund Survey

10 Multifonds for every fund The survey has brought to the fore the challenges facing our clients in 2016 continued regulatory pressure and market turmoil, coupled with the threat of disruption is putting increased pressure on fees and operational costs. This is forcing clients to look at ways of reducing costs and maximizing efficiency, but at the same time evolving to meet new client requirements such as middle office, new jurisdictions and new asset classes. Over the years, the Multifonds platform has had to cater for a wider range of fund and asset types. Our approach is to handle all major asset classes and fund types across the major global jurisdictions from a single platform. This has been the foundation of Multifonds ongoing drive for excellence; offering operational efficiencies and flexibility to meet new product, growth areas and regulatory demands as they arise. We are proactive within our client community to continually assess the impact of regulatory initiatives. Active client working groups work closely with our product team to identify the impact and required changes to the platform, resulting in timely compliance and shared costs to benefit all clients. OECD CRS and MiFID II have been the focus of the most recent client working groups. To comply with Money Market Fund (MMF) reforms, Multifonds supports intraday NAV calculations for floating NAVs, workflow and exception management for intraday NAV operations, ad-hoc liquidity fees across funds and share classes, workflow controls for temporary redemption gates and accounting data for portfolio diversification analysis and stress testing. To support the industry growth and popularity in ETFs, Multifonds supports ETF/PCF basket management for flexible creation and valuation of ETF baskets and reporting and unit creation/redemption of basket components. Providing efficient global investor servicing across fund types is key. Being able to do this for every fund across both traditional and alternative funds from a single platform is critical to clients as they seek to consolidate and rationalize the complexity of their middle and back-office systems. Profiles Keith Hale T E Keith Hale is Executive Vice President, Client and Business Development with global responsibility for business development, client services and transfer agency. Working with top-tier global clients such as BBH, BNY Mellon, HSBC, JP Morgan and Northern Trust, he has over 25 years experience creating and building fintech companies for the asset management, securities services and prime brokerage sectors. Based in London, New York, San Francisco and most recently Luxembourg, he regularly chairs industry working groups and is a member of ALFI TA and Fintech steering committees. Sern Tham T E Sern Tham is Global Head of R&D responsible for all product, support, development, technical and quality assurance functions for the Multifonds product. Sern has over 15 years of experience in the wholesale banking and investment industry. He was previously Director of Strategy and Execution for Omnium (formerly Citadel Solutions) through its inception and business build, and was also a senior manager at McKinsey and Company, Inc. Laura Adams T E Laura Adams is Head of Marketing responsible for the global marketing function at Multifonds. Laura has over 20 years experience all of which have been spent creating and working for fintech companies in the asset management industry. She was previously a founder and head of marketing at Netik (CoreOne Technologies, now part of MarkIt) in London. 8 MULTIFONDS The Every Fund Survey 2016

11 Respondent profile The survey was carried out in March 2016 and received 125 responses from the global asset management industry, including global custodians/fund administrators (30%), asset managers (17%), third-party administrators (24%) and insurance companies (2%), with regulators, consultants and law firms accounting for the remaining respondents (27%). The fund administrators collectively service assets totaling $27trn, and the asset managers collectively manage assets totaling $19trn. Value of funds administered Less than $1bn Between $1bn and $20bn Between $20bn and $100bn Between $100bn and $500bn More than $500bn Not applicable 30.9% 4.4% 2.9% 10.3% 17.7% Respondents are spread globally with 77% based in EMEA, 17% in North America and 6% in Asia, located in Belgium, Canada, France, Germany, Hong Kong, India, Ireland, Italy, Luxembourg, Malaysia, Malta, Mauritius, Portugal, Romania, Singapore, South Africa, Spain, Sri Lanka, Sweden, Switzerland, UK and United States. 40% of the respondents are Multifonds clients. 33.8% 3% of administrator respondents were from organizations with AUA less than $1bn, 10% between $1bn and $20bn, 18% from $20 to $100bn, 34% from $100 to $500bn, and 31% from over $500bn. Value of funds managed Less than $1bn 8.4% 4.2% Between $1bn and $20bn Between $20bn and $100bn Between $100bn and $500bn 25.0% 20.8% More than $500bn Not applicable 20.8% 20.8% Of the asset manager respondents, 4% were from organizations with AUM less than $1bn, 21% between $1bn and $20bn, 21% from $20bn to $100bn, 21% from $100bn to $500bn, and 25% from over $500bn. Types of funds serviced Mutual funds Hedge funds Money market funds Private equity Real estate Pension funds ETFs Insurance Not applicable Other 68.0% 60.8% 57.6% 57.6% 52.8% 44.8% 40.8% 39.2% 18.4% 4.0% Respondents service a mix of both traditional and alternative funds, including mutual funds, money market funds, hedge funds, ETFs, real estate, private equity, insurance, pension funds, unit trusts and retail funds. MULTIFONDS The Every Fund Survey

12 Multifonds recent industry recognition Global Global Custodian Awards Innovation Award for Best Technology Platform across HFA and MFA 2015 & 2016 Best Transfer Agency Platform 2014 Best Provider for Fund Administrators 2013 Banking Technology Readers Choice Awards Best Funds/Asset Management Product/Service 2015 Best Post Trade Processing Product/Service 2014 & 2012 Waters Buy-Side Technology Awards Best Buy-Side Portfolio Accounting Platform 2012 EMEA Custody Risk European Awards Post Trade Technology Vendor of the Year 2015, 2014 & 2013 Funds Europe Awards Technology & Trading Provider of the Year: Back Office 2012 Americas Custody Risk Americas Awards Post Trade Technology Vendor of the Year 2015 & 2014 Waters Rankings Awards Best Accounting System Provider 2014 About Multifonds Multifonds, a Temenos company is the award winning investment software provider for fund accounting, portfolio accounting and investor servicing and transfer agency on a single platform. Today more than $5trn in assets for both traditional and alternative funds are processed on Multifonds in more than 30 jurisdictions for the world s leading global custodians, third-party administrators, insurance companies and asset managers. Temenos Group AG (SIX: TEMN) is a market-leading software provider, partnering with 2,000 financial institutions, including 38 of the top 50 banks, to transform their businesses and stay ahead of a changing marketplace.