The answer lies in regulation, exchange-traded funds and operational outsourcing, according to a report from Deloitte.
The firm believes that fund companies will shift part of their focus back to the operations side of the business in 2013 in the form of outsourcing. “Middle-office outsourcing, for instance, is finally gaining traction, as firms consider offloading functions ranging from corporate actions and foreign exchange to securities lending and collateral management,” according to the report.
“Many fund groups are considering consolidating their technology platforms, as they have yet to merge the many applications they added during the period of growth and acquisitions before the downturn. These systems may now be compromising their cost structure, scale, and flexibility. In addition, the current situation makes reporting more difficult, particularly pertaining to risks. Fund firms are beginning to evaluate the capital expenditures they will need to bring these platforms together so they can eliminate redundancy and operate more efficiently. New technology upgrades are also on the table.”
The firm also anticipates that the Financial Stability Oversight Council will label one or more large mutual funds as systemically important financial institutions next year, making them subject to additional regulatory requirements. Other Securities and Exchange Commission initiatives in 2013 could result in the adoption of new requirements for target date funds. “For SEC inspections, we expect securities valuations, fund directors, and the oversight of omnibus intermediaries to remain in the spotlight,” according to the report.
On the ETF front, the folks at Deloitte expect to see more balanced and fixed income funds come to market in 2013. Additionally, fund firms offering alternative, hedge fund-like strategies are likely to attract inflows, according to the report.