Asset owners lose sleep over regulation

Keeping pace with both global and local regulation and reporting to regulators are keeping Australian asset owners up at night, new research showed.

The BNP Paribas ‘Asset Administration and Custody Review' said two thirds of the 110 asset owners and managers surveyed (67 per cent) said regulation is a concern, with a fifth of respondents (20 per cent) never having stress-tested even though regulation requires super funds to do so.

Meanwhile 87 per cent said regulation has led to increased costs.

Many surveyed said they could not pass those costs onto investors, while two out of five said external custodians and administrators were helpful in curbing costs.

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Over half of respondents are resorting to their own resources and up-skilling teams to tackle regulation, while 41 per cent are using external support, 23 per cent are using external service providers and 18 per cent use consultants or advisers.

Around 8 per cent do not even know how regulation will hit their cost base, while a third of respondents (31 per cent) worry about cutting costs further.

On the list of concerns was meeting performance targets, with 45 per cent losing sleep over it.

Staff management and resourcing issues worried 32 per cent.

"The most concerning operational issue is risk management — improving risk analytics and improving the risk-return profile of their portfolios — which worries over two-thirds of respondents," managing director Peter Baker said.

"More than half (53 per cent) want a better understanding of their investment risk, with two out of five (42 per cent) not satisfied with their risk reporting."

Only 5 per cent said nothing concerned them.