Third-party fund administrators see the use of cloud data as an important development for the sector and some anticipate collaboration with fund manager over the provision of markets data.
Although respondents to the Funds Europe Third-party Administration Survey reported mixed views on how realistic it is for the industry to collaborate on the provision of market data, some said it is already happening.
Our survey this year asked third-party administrators about a range of questions, including about where the wider industry could collaborate and about its preparedness for the T+1 settlement cycle. Survey respondents were unsure whether the industry was ready for the T+1, which shortens the settlement period for most securities issuances and trades from two business days after the trade date to one day. T+1 will be introduced in Europe in October 2027 following its implementation in North America last year.
Among custodians, and measured by assets under custody (AuC) globally, the largest firm was State Street Corporation which reported global AuC on 30 June last year of US$32,161bn, of which 17% ($5,361bn) was held in Europe.
We do not have figures for BNY or JP Morgan, two of the largest custody banks in the world. BNY reported combined assets under custody & administration (AUC/A) of $49.5trn in its June 2024 financials. JP Morgan reported AUC of $34 trillion. Citi, another major player, did not disclose AuC or assets under administration (AUA), but did report combined AUC/A.
Sticking with AuC, France’s BNP Paribas was in second place globally ($13,941bn) and Northern Trust in third place ($13,041bn).
Ranked by AuC in Europe, BNP Paribas reported the largest amount with $12,242bn in Europe – considerably higher than second placed State Street with $5,361bn –accounting for 88% of BNP’s total global AuC of $13,941bn.
State Street was also the highest ranking custodian globally when measured by assets under custody and administration (AuC/A) logging $44,312bn – $20bn ahead of second-placed Citi ($24,200bn) and BNP Paribas ($16,699bn), who just edge out Northern Trust in fourth place ($16,568bn).
As with AuC, BNP Paribas reported the largest amount of AuC/A in Europe at $14,310bn. BNP Paribas is followed by State Street ($9,407bn) and Caceis ($8,588bn) in second and third place, respectively.
BNP Paribas (86% of AuC/A in Europe) and Caceis (100%) have all or most of their AuC/A in Europe. State Street has most of its AuC/A outside of Europe and 21% in Europe. Northern Trust and BBH have a more even split (41% and 45% in Europe, respectively), while still having most of their assets outside of Europe.
A good year
It has been a good couple of years for Chicago-based Northern Trust which topped our list of the eight largest custodians measured in assets under administration (AuA). At the end of June last year, Northern Trust reported a total global AuA of US$8,285bn and European AuA of $3,621bn (44% of its global AuA), both of which are the highest figures for custodians.
Nick Gilbert, head of global fund services for Emea at Northern Trust, said that 2024 saw asset managers strive to increase their operational efficiency, resiliency, and scale in response to the challenges posed one of the toughest environments in recent times.
“Asset managers also continued to focus on removing undue complexity in their business – simplifying administration and exploring opportunities to outsource functions identified as potentially non-core to their businesses,” he said.
Gilbert added that discussions around augmenting data management, securities finance, liquidity management, trading and foreign exchange capabilities through new outsourcing partnerships featured prominently and continue to do so.
“Managers are focusing more acutely on distribution strategy and pursuing the right products, markets, assets, and investors at the right time.
“This is an area of significant innovation and rapid change. In Europe, it included high levels of focus on new emerging products such as use of the European Long-Term Investment Fund (ELTIF) 2.0 and UK Long-Term Asset Fund (LTAF) vehicles to deliver ‘semi-liquid’ fund products investing in a hybrid mix of public and private assets,” added Gilbert.
In terms of AuA, Paris-based custodian Caceis, was in second place, both globally and in Europe. All of Caceis’ $3,543bn global AuA is held in Europe, putting them just behind Northern Trust’s European AuA.
The third-ranked custodian both globally and in Europe, is BNP Paribas, which reported $2,758bn in AuA globally, of which 75%, or $2,068bn was held in Europe.
Ranked by proportion of AuA held in Europe, Caceis, at 100%, led the pack, with BNP Paribas in second position with 75% and Brown Brothers Harriman at 48%, slightly ahead of Northern Trust at 44%.
When it comes to the custody of private market assets, State Street Corporation reported the largest AuA globally at $951bn, of which 9%, or $82bn, was held in Europe.
State Street was also the only custodian to report AuA in public and private markets. Globally, State Street’s AuA was 41% in public and 59% in private markets. However, within AuA held in Europe, State Street’s proportion in public markets was higher at 74%, versus 26% in private markets assets.
With AuA of $263bn, Caceis reported the largest amount of private markets assets in Europe.
Largest private markets globally
Our survey rankings of administrators showed the largest amount of AuA in private markets globally being held by Alter Domus, which reported $2,700bn end June 2024 of which 24% ($653bn) was held in Europe. They are followed by Apex with a global AuA of $2,024bn and Universal Investment Group, whose global AuA is $1,243bn.
All of Universal Investment Group’s AuA is in Europe, making them the top administrator by European AuA by a distance ($1,243bn). The European top three administrators, just like the global top three, are made up Universal, Alter Domus ($653bn European AuA) and Apex ($566bn).
Universal Investment Group reported the largest total of AuA in Europe for assets in public markets, with a total of $961bn, while Alter Domus report the largest total of AuA in Europe for private markets, with a figure of $653bn.
Globally, Universal’s AuA is 89% in public and 11% in private markets assets (all in Europe), while Apex is 39% in public markets and 61% in private and CSC have an almost even split, they are 48% in public and 52% in private.
A single market
Commenting on distribution over the past couple of years, Julian Mayo, head of asset manager solutions at Universal Investment, said: “The overseas funds regime will simplify fund sales into the UK, particularly for Ireland and Luxembourg registered funds.
“From our clients’ perspective, for the first time since Brexit, when they are looking at the UK/Europe, they are looking at something resembling a single market.
“Starting in September, asset managers can now avail themselves of the Overseas Fund Regime (OFR) to register existing funds, making their lives much easier. A non-UK manager will then in principle be able set up funds in Ireland and Luxembourg and distribute them into the UK.”
“We foresee that the OFR will benefit asset management firms, consumers, and the UK economy alike.”
Data collaboration?
On the surface, when asked about whether collaboration on data between asset managers and asset servicers is realistic, respondents appear to be fairly evenly split – 37% said it wasn’t (scoring a 1 or 2) and 44% said it was (giving a 4 or 5).
However, digging deeper, it does seem that respondents were more likely to feel strongly that data collaboration was realistic than to feel that it wasn’t. Around 1 in 4 either said collaboration was ‘very realistic’ (giving a 5) or that they knew asset managers and servicers who were already collaborating. This compares to only 1 in 10 saying collaboration over data was ‘not at all realistic’ (by scoring a 1).
In total, 7% said they know asset managers and asset servicers who are already collaborating on data. It is worth noting, however, that custodians were more pessimistic about collaboration being realistic than the administrators.
Security and technical challenges
On this subject, Ram Chandrasekar, global head of fund solutions at CSC, said that sharing market data between asset managers and asset servicers is limited by both security and technical challenges.
“Firms must invest in robust security measures to prevent unauthorised access, and data privacy concerns require careful handling to avoid breaches,” he said.
“Additionally, establishing a shared infrastructure involves costly standardisation efforts to align different data formats and systems. Managing updates and maintaining data integrity across platforms adds operational complexity, making collaboration difficult and costly.”
Responding to the same question, Cilian O’Gogain head of offshore sales for Ireland and Luxembourg and head of securities services for Ireland at custodian Citi, said that asset managers are becoming increasingly aware of the volume of data that asset servicers are consuming and the technological enhancements made by these organisations to be able to store, manipulate and disseminate this data.
“It is becoming increasingly likely that there will be a strong demand for asset servicers to aggregate, collate and disseminate market data to enhance compliance monitoring, operational efficiency and potentially investment-decision making,” he said.
“On the part of asset servicers, they are strongly positioned to deliver this data infrastructure as they can leverage economies of scale across their suite of clients.”
Meanwhile, Arnaud Claudon, head of asset owners & asset managers client lines at custodian BNP Paribas, said that transparency in valuation policies is key, and the cost of data sources can be a challenge for asset managers and their service providers.
“We therefore do see an opportunity for market data collaboration when it comes to harmonising the use of a set of fairly common data sources for net asset value calculation, especially for listed assets,” he said.
Other areas of collaboration
Survey respondents were also asked to comment on whether there are any other areas where fund managers and asset servicers might collaborate in order to create a better industry.
Citi’s O’Gogain said that emerging technology is a key area of collaboration – for example, tokenised funds.
“Securities services providers are keen to partner with managers who are engaging with emerging technologies so they can leverage each other’s capabilities and knowledge to enhance product suites and the investor experience.”
Ross Youngs, chief commercial officer at administrator Belasko believes that technology and regulation are two areas where fund managers and asset servicers could collaborate more effectively to create a better industry.
“Collaboration around technology, can help develop a more efficient service operating model with greater data transparency, reducing duplication of work,” he said.
“This streamlining will ultimately result in serving investors more efficiently. On the regulatory side, closer collaboration supports the development of products that are better suited for investors, thereby providing new sources of capital to the industry.
Cloud data, T+1, migrations
The Funds Europe survey also found that three in four respondents think the advent of cloud data is an important development (giving a 4 or 5) compared to only a small minority (4%) who disagree (they gave a 1 or 2). Both custodians and administrators agreed that it was an important development.
Survey respondents are unsure the European asset industry is prepared to move into a T+1 settled environment. Three in 10 say the industry is prepared, 2 in 10 say it isn’t, whilst just over half say they are unsure. Custodians were more likely to feel the industry was better prepared than administrators were, although half still said they were unsure.
Over half of respondents (56%) say the migration process from one administrator/custodian to another is satisfactory (this is the case for both the administrators and the custodians), with 20% of respondents saying it is unsatisfactory.
While this may seem high, none of this 20% chose ‘very unsatisfactory’, so although there is some dissatisfaction, it does not appear to be strong.
BNP Paribas’s Claudon is one of those who believes the process is largely unsatisfactory.
“Investment fund servicing has evolved into a complex ecosystem of interfaces, external providers, customised reports and bespoke controls to meet the internal set-up, organisation and distribution channels of asset management firms,” he said.
Meanwhile, David Bridger, head of fund administration at administrator Corvus Administration, said it was important to set realistic timescales for the migration of data.
One single improvement
Asked to nominate one single improvement in the asset management industry, CSC’s Chandrasekar said he would implement standardised data and reporting formats across the board, using frameworks like the ILPA (Institutional Limited Partners Association) templates as a model.
“Widespread adoption of standardised templates would streamline reporting processes, reduce compliance burdens, and enhance data accuracy for asset managers, custodians, and administrators,” he said.
“Such uniformity would increase transparency and make it easier to integrate with technology platforms and service providers, ultimately lowering operational costs and elevating the client experience.”
Paul St Romaine, director at administrator Fairway Fund Services, said the single most important change that the industry could make would be to ensure service providers are kept updated with pipeline activity to allow for preparation from both a governance perspective “and to facilitate transactional deadlines being met in a timely manner”.
Commenting on the issue of ESG compliance, Fouad Massabni, ESG commercial offer head at Societe Generale Securities Services (SGSS), said that 2024 had been a good year for his company especially among clients who experienced difficulty in collecting and managing data and reporting under the different formats requested by local and European regulators.
“Based on current client satisfaction feedback, SGSS is convinced that its ESG services adoption will be a cornerstone to guiding client investment sustainability roadmaps for more ambitious aspirations and quicker time to market,” he said.
This article forms part of the Funds Europe Third-Party Fund Administration Survey published in the January/February 2025 issue of the magazine.
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