The golden era for asset management comes as nearly $5tn in assets worldwide shifts out of investment banks following new US regulation that restricts banks from trading and investing their money directly, according to research by accountancy firm KPMG. Traders are moving into the expanding asset management industry and the sector is achieving “unprecedented scale”.
Due to this seismic shift of money and the migration of banking professionals, asset managers are beginning to attract more intense regulatory scrutiny. “With so many activities previously housed in banks moving over to asset management, it is inconceivable that the industry will not be closely monitored,” said Tom Brown, global head of investment management at KMPG.
Although asset managers maintain client funds are ringfenced and argue that investment losses are sustained by investors rather than the firms themselves, regulators worry that their risks are material and could affect the broader financial system. Shadow banking is “the next big battleground” for regulators and politicians, which will place greater scrutiny and pressure on operations within asset management firms, the report said. The KPMG report also suggests that asset managers could soon be required to hold additional capital to help meet a sudden wave of redemptions. “This could impact the performance of both asset managers and the funds they manage,” it added.
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