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MarkeTalks: Servicing Trends of the Future - Private Assets
34 Plays2 years ago
Private Assets have been a hot topic in the past years. The combination of increased investor demand with managers entering the market or increasing their fund ranges, has led to a need for more comprehensive servicing solutions with companies exploring how to effectively manage costs and meet the demands of their clients.
Listen as Melanie Sande, Director for Private Assets, Product Solutions, HSBC Markets & Securities Services and Alexis Vasquez Meissner, Global Co-Head of Platform Solutions, Global Head of Sales & Client Management, HSBC Markets & Securities Services explore the servicing trends of the future.
Hosted on Acast. See acast.com/privacy for more information.
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Transcript
Introduction to HSBC Podcasts
00:00:02
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Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
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Make sure you're subscribed to stay up to date with new episodes.
00:00:16
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Thanks for listening.
00:00:17
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And now onto today's show.
Market Talks Overview
00:00:25
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Welcome to the latest in our Market Talks podcast series.
00:00:29
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We are featuring a variety of different topics that are currently trending in the private asset space.
00:00:35
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And we now explore the servicing trends of the future.
Future Servicing Trends in Private Assets
00:00:38
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Introducing the topic is HSBC Security Services Director for Private Assets Product Solutions, Melanie Sanday.
00:00:45
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Melanie, over to you.
00:00:47
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Thanks, Gabriella.
00:00:49
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Well, private assets have been a hot topic in the recent years.
00:00:52
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The markets enjoyed high growth rates of 19% on average in recent years, reaching a size of over $9 trillion in 2021, with forecast annual growth rates now out to 2027 of around 12%.
Investor Demands and Servicing Solutions
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With managers entering the market or increasing their fund ranges to meet increased investor demand, there has been a need for more comprehensive servicing solutions with companies exploring how to effectively manage their costs and meet the demands of their clients.
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Joining me to further explore this topic is Alexis Meissner, Global Co-Head of Platform Solutions and Global Head of Sales and Client Management at HSBC Markets and Security Services.
00:01:35
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Thanks for joining me today, Alexis.
00:01:37
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Thanks, Melanie.
00:01:38
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It's great to be with you.
00:01:40
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Great.
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Let's kick off, Alexis.
00:01:42
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What trends are you seeing in the private assets market and what are clients looking for from their suppliers?
Automation and Outsourcing Interests
00:01:47
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The private assets markets have historically been operationally manual and use technology platforms that are specialized by class.
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Clients are now looking to automate and scale up their operations efficiently while limiting the technology investment required.
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The challenges they're looking for help with include aggregation of data across asset classes from different core systems, access to operational expertise and automation of processes and reporting, and there's interest to outsource more, either by focusing on asset management internally or to gain access to resources and systems without having to invest and maintain in-house.
00:02:23
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Other pain points can include supporting special purpose vehicles or SPVs in many countries and payment operations.
UK Long-term Asset Fund Structure
00:02:29
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From a fund structure perspective, we're starting to see interest in the new UK long-term asset fund or LTAF structure and recently supported the launch of the largest LTAF in the market.
00:02:39
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The open-ended structure enables long-term investors such as pension funds to access private market investments while retaining a degree of liquidity.
00:02:47
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Those are some interesting trends, Alexis.
00:02:49
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But how do the service requirements of limited partners differ from those of asset managers?
00:02:53
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Great question, Melanie.
Operational Challenges and SPVs
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LPs are looking to reduce the operational challenge of investing with multiple asset managers and overseeing them.
00:03:01
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They're interested in aggregating data across managers and looking through fund investments into underlying exposures.
00:03:08
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Moving cash is very important, including monitoring and paying capital calls, checking distributions, and moving money up and down structures.
00:03:17
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They also look for efficient servicing of SPVs where they are used, including maintaining constitutional documentation, preparation of financial statements, and minimizing bank accounts through use of virtual accounts.
00:03:29
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Finally, they look for support in onboarding asset managers and performing due diligence on them.
00:03:34
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Thanks, Alexis.
00:03:35
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There's a lot there.
00:03:36
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Another hot topic in the market is ESG.
ESG Challenges and Data Solutions
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What client requirements are you seeing in that space?
00:03:41
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And where do you see the challenges?
00:03:43
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Definitely a hot topic.
00:03:45
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And the key themes and challenges that our clients come to us to talk about are regulation and ability to keep up with the pace of change, clampdowns on greenwashing,
00:03:56
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Investor confidence in claims made by sustainable funds.
00:03:59
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And there we see that sentiment is low in investors that these claims are accurate, leading to a greater requirement for managers to substantiate the claims.
00:04:07
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With the lack of subject matter experts in the ESG space, difficulty in implementing technology solutions and a continuing cost challenge for the industry
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We're seeing clients wanting to outsource the ESG reporting challenge to third parties, but ESG market data suffers from a lack of standardization, difficulty around data collection from asset managers, and limited data available from portfolio companies.
00:04:29
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To address the issues, the data model, data architecture, and approach to collection and aggregation need to be carefully designed.
00:04:36
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HSBC is solving this through a service which will allow clients to look through funds and see their ultimate asset allocation.
00:04:43
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The ESG metrics will be reported back for the underlying portfolio companies held through the fund investing entity.
00:04:49
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Oh, interesting.
Data and Reporting Needs
00:04:50
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And are there other data service requirements that you see in the market?
00:04:54
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Absolutely.
00:04:55
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We see a desire for looking through fund level data to the underlying holdings in order to aggregate exposures and improve risk monitoring.
00:05:02
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This allows LPs or funds of funds to better monitor their performance.
00:05:06
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Larger managers may have a variety of service providers and are looking for the ability to aggregate data across fund administrators, asset types, and domiciles.
00:05:15
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We're also seeing interest in being able to use the same data across the front and back office, even when there are different systems being used.
00:05:22
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And for managers with both public and private market strategies, they'd like to be able to aggregate the data across asset classes and markets for enterprise level reporting.
00:05:32
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They'd also like to provide a more consistent investor reporting and query management experience across strategies, while recognizing that there will naturally be some differences in the reporting that's required.
00:05:42
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Well, let's talk a bit about how you're responding to those requirements.
00:05:46
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Where are you focusing your investment to support private assets?
HSBC's Client Support Initiatives
00:05:49
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Another great question, because this is such an important asset class for us and something that we've been putting a lot of time, effort, energy and investment into.
00:05:58
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So in addition to the ESG and look through data solutions already mentioned, we're increasing client adoption of online portals for flexible data access and common workflow and query management.
00:06:08
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We're developing our LP middle office service, and we're offering a master service capability whereby we can bring together both direct HSBC services across the bank and also utilize partners to deliver additional capabilities such as SPV administration or loan administration.
00:06:24
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This allows clients to benefit from an extended range of special services while reducing the procurement, oversight and operational challenge of identifying and managing multiple providers themselves.
Opportunities in Private Assets
00:06:35
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Thanks so much for joining me today, Alexis, to shed some light on the servicing trends of private assets.
00:06:40
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It really sounds like an exciting space with plenty going on and lots of future opportunity.
00:06:45
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Thanks so much, Melanie.
00:06:46
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And I couldn't agree with you more.
00:06:48
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Look forward to what we continue to develop in this space.
00:06:53
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I totally agree, Alexis and Melanie.
00:06:55
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I did not know that all these things were going on in the private asset space.
00:06:58
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So, yes, I've been in light with myself.
Podcast Conclusion
00:07:00
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So I would like to thank you for listening to this edition in our series of Market Talks podcasts.
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We hope that you enjoyed learning more about private asset servicing trends.
00:07:10
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Stay tuned for more from our podcasts as we explore more trends in the coming weeks.
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Thank you for joining us at HSBC Global Viewpoint.
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We hope you enjoyed the discussion.
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Make sure you're subscribed to stay up to date with new episodes.