The start of the tea party – funds in the 21st century

Having
attended the funds management session, I can now see why I got out of
insurance twenty years ago.  I mean, it may be interesting for the guys
involved but watching this session was a little bit slow.   

The main
outcome of the discussion for me was how firms had moved away from
manufacturing fund products to distributing them.  This was put down to
Open Architecture, with Robert Pozen stating that instead of 80%-90% of
funds going to traditional fund managers, its only 10%-15% these days
due to Open Architecture.  There was a fair debate around the impact of
hedge funds as well, with Robert again making the incisive comment that
although hedge fund managers had grown form 1,000 to 10,000 over the
last few years in the US markets, he doubted that “the number of
investment geniuses had also gone up ten-fold”.  I’m with him on that
one.

No
fault of the moderator, Jean Sonneville, who heads up SWIFT’s
investment management services group, who steered the discussion along
as best he could.  Maybe it was more due to the room which was packed,
as are all the rooms for the conference sessions and discussions. 

The
guys on the panel included Jean-Baptiste de Franssu, CEO of Invesco
Europe; Tim Keaney, Co-CEO, BNY Mellon Asset Servicing; Robert Pozen,
Chairman, MFS Investment Management; and Chris Ryan, Chief Executive
Officer, ING Investment Management Asia Pacific. 
   

Meanwhile, Tim of BNY stated that 107% credit default swap
derivatives were up 107% so far this year, whilst notional derivatives
were up 40%, but that the cost of processing these trades was about 50
times more than the costs with processing an equity trade.  No wonder
we wonder about derivatives costs and best execution.

Probably
the most interesting aspect of this debate was the audience interactive
voting, with a vote before the start of the debate and at the end as to
which of the four themes of regulatory change, costs, hedge funds and
open architecture was the most important.  Here’s the results:

Before                                                                                             After

13%        Regulation and level playing field                                          23%

40%        Operational efficiency and cost reduction                              32%

26%        Convergence of alternative and traditional asset management 13%

21%        Structural changes due to open architecture                          32%   

After
that excitement it was off to lunch with the Great, the Good, the Bad
and the Ugly of the senior luminaries in the banking world.  IBM were
holding their annual lunch for the top notch with folks like Charles
Bryant (formerly EPC now EBA), Gerard Hartsink (EPC and ABN AMRO), Tom
Buschman (TWIST) and Eric Sepkes (Citi) there.  Plese note that this
list bears no relation to my earlier order of play :)

IBM
arranged the tables to discuss various issues in the markets from SEPA
to m-payments to globalisation to supply chains.  I decided to sit on
the supply chain table, as I'm heavily involed in this area, and this
proved a bad move as I appeared to be the only one interested in this
subject … until I was joined by Tom and Charles, both of whom are
heavily involved in the EC’s discussions of e-invoicing so maybe that’s
why.

The lunch finished amiably and enjoyably with a cup of tea
… after all, this is a Boston Tea Party isn’t it?  I just wonder what
will get thrown into the harbour this year.  Ah yes, there’s a few
parties tonight so watch this space.