We recently chatted with BBH’s Chris Remondi, who is a BBH Partner responsible for the Global Relationship Excellence and Markets groups in BBH Investor Services. We discussed Chris’ view on client priorities in 2024, practical solutions for data normalization, ETF product launches, the rise of alternative assets, and more. Read on for insights from Chris and a peek at what’s to come for BBH in the new year.
What sort of priorities are you hearing about from your clients as they're planning for 2024?
Chris: From the meetings we’ve been having recently, we see three key areas of focus: alternative asset classes, ETFs, and data.
Regarding alternatives, we continue to see demand from both established alternative managers and from more traditional asset managers—some of whom are more recent entrants to the space. Globally, we’re seeing an increase in more flexible investor liquidity terms and evergreen-like structures which blend aspects of open and closed-ended fund structures, as managers look to access a more retail-like, mass-affluent investor base.
When it comes to ETFs, last year, we accounted for almost a quarter of all new ETF launches in the US. Our clients are very much looking to either launch new ETF products, convert mutual funds to ETFs, or create a share class off of existing mutual funds similar to the Vanguard model. For asset managers that are just getting into ETFs, there are numerous questions around product launch that need to be explored. We have an internally developed tool called Launch, which is informed by our experience and expertise in helping clients bring new products to market, to help highlight those key questions for setup.
Data is another hot topic right now. Many of our clients are tired of hearing about data lakes, big data, data pools etc. and want help with practical solutions. We talk about data as a horizontal function, spanning systems and providers and our goal is to capture and normalize that information in a streamlined interface that can be implemented now, rather than ten years down the line.
That’s a topic that resonates with us as well, and a lot has changed in data management over the last few years. How are you helping clients navigate this changing landscape?
Chris: Making sure data is normalized across counterparties is a really complex process but we've been in that game for a long time with Infomediary. For background, Infomediary is a data hub that we launched 20 years ago to help our clients insulate themselves from all the different counterparties that they deal with electronically. We aggregate data across counterparties, normalize it, and feed it back to the client. The key is to meet our clients where they are, whether that’s publishing an API for them to pull or publishing data into third party solutions at their request.
Technology has become an important part of the service provider ecosystem for many of our clients. Have you observed a similar shift? And if so, how are you addressing this interest in innovation and underlying technology?
Chris: Yes, definitely. Every client wants to talk to us about what our technology roadmap is, but they also want to share ideas. What are you doing with artificial intelligence? What are you doing with large language models? What are you doing for optimization? And we really want to meet our clients where they are in that cycle. Some clients want to interact with their data using our tool, but we also serve clients who are using another platform.
Wherever our clients are, we always embrace the opportunity to talk innovation and to learn from each other. One thing that has come up a lot recently is how we're doing anomaly detection, looking for NAV errors for example. We’re able to leverage our anomaly detection tool to not only eliminate manual work but also detect movement in the market that may have been missed before. This has been great for our internal operations, and now we’re looking to add value for our clients using the same technology.
T+1 is top of mind and I know BBH has been really active in leading discussions with clients and the industry around what this means for investment managers. Could you give us a high-level overview of how you’re advising clients prepare?
Chris: It's a topic that everyone should be thinking about. Right now, we’re spending a lot of time with clients gauging their preparedness and how we can help. We're prompting them with key questions they need to consider: How do you become more operationally efficient? How do you solve for the affirmation process on a faster deadline? How do you ensure timely settlement?
We use a couple tools we’ve developed to model out clients flows and whether their affirmations are hitting within the deadline already and we have another tool that looks at whether they're going to struggle to perform the funding, the FX, or the trade settlement. We are able to model that out and show clients the markets where they may have gaps, for example with respect to broker behavior, instruction timing, and whether there will be mismatches in settlement in different markets due to different uptake of T+1 settlement.
Another hot topic this year has been ESG. What sort of challenges are your clients facing with the rise of ESG funds and emerging regulation around this?
Chris: It seems to us the intensity of focus on ESG has lessened in the US this last year, and to a large extent in Europe as well, where it remains essential but has stagnated through a mix of regulatory uncertainty and complexity. We have a couple of tools that we use post-trade to analyze ESG conformity, but there is also a lot our clients have to do to set up a vehicle pre-trade too.
Looking ahead, the forefront of policy-making is still coming out of the EU, starting with SFDR which is a very complex proposal for how to oversee ESG portfolios. My guess is that it will probably get simplified, and while SFDR has certainly set a high bar for ESG regulation globally, it’s likely other regulators such as the SEC will set less onerous standards based on existing global frameworks such as TCFD, which is more specifically focused on climate.
Ultimately, compliance with future regulation boils down to access to quality data, which we’re well-positioned to help with.
Is there anything else on BBH’s roadmap or plans for 2024 that you’re excited to share?
Chris: Investing in talent has been a big priority this year and that will continue into 2024. We're about 7% higher in headcount this year compared to last year, which includes a significant number of new roles to support the growth of our business. We’re prioritizing hiring talent to support our initiatives around alternatives, ETFs, and data and we’ve been very successful in building our talent pool in those areas this year.
We will also continue to invest in our technology. Our Infuse DX platform was rolled out this year, and we’re currently building out additional data elements to move quickly from custody data to fund accounting data to fund administration data. All of that data will be in our platform. And we’re continuing to invest in our alternatives platform to support clients as they move into new products and broader markets for distribution.
Overall, business has been good and that’s being driven by a lot of the trends in the market that we have helped clients address. We’re known for our level of service and we’re seeing a lot of demand for high touch in areas like alternatives. We’re finding managers are realizing the high service levels that they need to run their business effectively and that aligns well with the value we provide.
For more information on what other solutions providers are doing in this space, read our Solutions Market Perspective Series.
Topics
