Black Swan Disruption Drives Trends in ESG and Single-Source Solutions

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As Covid-19 disrupts markets and destroys value, private market participants need to respond quickly to newly evolving trends with demand for ESG investment and single-source solutions reshaping business.

Black swan events seem to be becoming more frequent and, whereas the global financial crisis of 2008 led to more regulation and caution, the Covid-19 pandemic could precipitate a whole different set of stresses and opportunities for private markets, as highlighted in our latest whitepaper ‘Changing buying trends in the private markets’.

 

Standing still is not an option

 

Nobody can truly predict the future, but the effects of the pandemic will undoubtedly lead to permanent changes in how we run our businesses and how investors view private markets. Asset managers, capital markets and private companies have all responded to employees needing to work remotely, with many wishing to continue to do so, and clients not wanting to meet in person but still demanding information that is more detailed. To remain competitive, businesses have adapted and committed more investment to digitisation, making information readily and clearly available, both internally and externally. A fundamental change to business processes is occurring and the winners will be those that move swiftly to take advantage of this opportunity.

 

Changing business trends and customer needs

 

Market volatility will continue to put pressure on fees and margins while the demands of investors increase and, while you cannot regulate against a pandemic, regulatory demands will not go away and regulators will themselves seek to gain better access to data in private markets to monitor real-time risks. Firms need to both control costs and innovate to evolve the client experience.

 

Technology will have an increasingly important role to play in the success of businesses, with the application of blockchain and other evolving technologies creating new opportunities for firms to differentiate themselves from the competition.

 

At the same time, investors are becoming more technology savvy and demanding: they are looking for real-time access to their portfolios, market analytics and risk factors. Firms need to be capable of delivering a better day-to-day service experience to retain investors and attract new ones.

 

Single-source solutions reduce both risks and cost

 

Leaders need to focus on their core business to drive revenues, but costs and risks continue to stress many firms. Homeworking during the pandemic has demonstrated the ability of firms to outsource non-core functions of the business. Firms should be assessing which functions can be outsourced, not only looking at the back-office but also middle-office and even some front-office functions.

 

In recent years we have already witnessed a move towards outsourcing of non-core functions but often this has resulted in management having to oversee relationships with multiple solution providers. This is both inefficient and increases the risk of issues falling between the gaps of separate providers.

 

A single-source provider can gain a complete understanding of the business, introduce greater efficiencies and mitigate both risk and cost. Asset managers, capital markets and private companies can benefit greatly by working closely with a provider that understands and specialises in their business sector, moving away from their existing largely fixed cost structure to one that can be flexible as the business evolves.

 

ESG – looking to the future

 

Before the Covid-19 pandemic, climate change was already driving growing interest in Environment, Social and Governance (ESG) factors. The experience of lockdowns and social distancing has further emphasised the impact companies can have on people and planet. Investors are responding by seeking to integrate sustainability to their policies and practices.

 

Forward thinking firms are already integrating ESG factors into their portfolio selections and using ESG indices as a part of their decision making process. Regulators are also starting to look at this area and, with even , this is a trend that will continue to gather pace. Early adopters are likely to gain a significant advantage and access to a reliable source of ESG indices, with smooth integration with other financial models is set to become essential in the investment industry.

How can Apex Group help?

 

As a global financial services provider, Apex Group delivers a comprehensive range of services to asset managers, capital markets, corporates, private clients and family offices. The Group has continually improved and evolved its capabilities to offer a single-source solution through establishing the broadest range of products in the industry, fund administration servicesdigital bankingcustody and depositary, and super ManCo services, business services including HR and Payroll and a pioneering ESG Ratings and Advisory services for private companies. With 45 offices around the world, we stand ready to support any business need.

 

Download the whitepaper or contact us to learn more about what Apex Group can offer you.

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