[ T H E
B I G
P I C T U R E
|
A R E
A S S E T
M A N A G E R S
S I F I s ? ]
At what point does an asset manager become a systemically
important financial institution (SIFI), a regulatory
designation that carries with it enhanced reporting,
liquidity and risk management oversight, stress testing
obligations and balance sheet capital requirements?
S
a g e rs
n
a
m
t
e
s
As
nt i n
a
h
p
e
l
e
e
th
t h e roo m?
hould asset managers be
classed as a systemically
important financial institution
(SIFI)?
It is a question which has
vexed a number of global reg-
ulators including the Financial
Stability Board (FSB) and
the US Financial Stability Oversight Council
(FSOC). The situation is being complicated by a
growing number of managers moving into areas
traditionally occupied by the banks.
Return generation at active asset managers
has not been to the satisfaction of institutional
investors, some of whom are demanding steep
fee discounts. Fixed income managers – in
particular – are finding it highly challenging to
meet client performance expectations due to
the difficult interest rate environment. Some
fund managers are looking to diversify not just
their strategies into riskier asset classes such
as emerging market debt, but going further and
evolving their entire business models. Such
models may include loan origination to small
and medium sized enterprises (SMEs), secu-
rities lending, prime brokerage, financing, and
various market making activities. Many of these
activities are associated with the traditional
banking model.
Basel III capital requirements have made a
number of the main revenue generating busi-
nesses at banks highly balance sheet intensive
and uneconomical, forcing them to scale down
their activities. An unintended consequence of
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