Aurelia Butler

A new generation of asset management chief executives have called time on a “golden decade” for their industry, warning that it is becoming increasingly difficult to navigate the competing pressures of markets, regulators and politicians. “The complexity of the demands on an asset manager are clearly increasing,” said Ali Dibadj, chief executive of Janus Henderson. “Clients are asking more of all of us, regulators are asking more from all of us, and our clients’ clients are asking more from us.” Katie Koch, chief executive of Los Angeles-based TCW Group, said asset managers were “facing increasing complexity around evolving regulation, migration of investment opportunities from public to private markets, globalisation of the opportunity set and the more recent politically charged portfolio management environment”. After a decade of zero rates and quantitative easing that pushed equity markets to record highs, investors are grappling with the challenge of a regime change towards both higher inflation and higher interest rates. “Asset management used to be a rising tide that would lift all boats and that’s no longer true,” said Yie-Hsin Hung, chief executive of State Street Global Advisors. The Financial Times identified at least 18 chief executives who have taken the reins of big asset managers since the start of 2022. This new guard is charged with stabilising their businesses following the worst year for the roughly $60tn industry since the financial crisis. Big falls across markets combined with investor outflows and spiralling costs, compounding pressure on active asset managers that have been fighting the march of passive investing. Investors globally pulled $530bn from investment funds (excluding short-term money market funds) last year, the fund industry’s worst for new business since 2008, according to data provider Morningstar.Investment managers’ revenues are underpinned by the fees they charge on assets under management, and falling assets are putting cost-to-income ratios — a key measure of investment manager profitability — under pressure, especially for less efficient players. “The golden decade for asset management is over,” said Stefan Hoops, chief executive of DWS, adding that investors now faced a market environment where “not everything is going up and up and up” but “costs are”.Last week BlackRock, the world’s largest asset manager, warned that the “traditional investing approach” of 60 per cent stocks and 40 per cent fixed income will serve investors poorly over the long term, calling time on a strategy that has been a cornerstone of many asset managers for more than 30 years. “The complexity of the markets right now — not just equities and bonds, but consumer behaviour, economics, geopolitics and regulation — is creating a lot of volatility and uncertainty,” said Andrew Schlossberg, chief executive of Invesco. “That makes creating a long-term business strategy challenging and we think it’s going to be with us for a while.”

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Asset managers have responded to profitability pressures by trying to diversify their businesses, adding higher-margin products such as private assets or targeting new client types or geographic regions, sometimes through acquisitions. Their business models have become increasingly elaborate and difficult to manage as a result.“The challenges of complexity are greater than the challenges of scale,” said Rob Sharps, chief executive of T Rowe Price. Customers now come to T Rowe through multiple channels, including direct access on brokerage platforms, through advisers or to buy specific products such as alternatives. “Then we do that around the globe.” He added: “It becomes a complicated business especially with the proliferation of regulation and different client preferences for vehicles, strategies or structures in end markets.”Increasingly fragmented and complex regulation is another area of concern, particularly around the fast-growing sector of investing on the basis of environment, social and governance factors. Asset managers are trying to balance the demands of a highly interconnected investment industry against retreats from globalisation and the increasingly politicised nature of ESG in the US. “Regulation is becoming much more complicated,” said Matthew Beesley, chief executive of Jupiter. “Regulatory pressures have increased in every region. We are also seeing regulatory divergences emerging within Europe following the UK’s exit from the EU.”For example, European regulators took a lead on defining standards for ESG investing, with the Sustainable Finance Disclosure Regulation, which aims to improve transparency and prevent greenwashing. But the UK is consulting on its own version of rules, which could take a different approach to the EU in the aftermath of Brexit, and the US Securities and Exchange Commission is preparing rules around ESG disclosures.Karin van Baardwijk, chief executive of Dutch asset manager Robeco, said that with the growing demand and associated supply of ESG products, “the risk of greenwashing is becoming more prevalent. This can damage the credibility of our industry as a whole . . . and will ultimately lead to more regulation.” In the US, asset managers including BlackRock and Vanguard are finding themselves a lightning rod for both sides of the political spectrum. Republican politicians are attacking them over the use of ESG metrics, contending that they are hostile to fossil fuel investments, while Democrats have criticised them for failing to do more to fight climate change. Meanwhile, asset managers are locked in a war for talent, notably in areas such as private assets, technology and sustainable investing, and trying to keep investing in their businesses to stay ahead of the competition.“The pressure on cost, inflation of wages, and the war on talent is really here to stay,” said Naïm Abou-Jaoudé, chief executive of NY Life Investment Management.“And the pressures we have on regulation, compliance and all the requirements mean the business is becoming more demanding . . . all of this is costing a lot in terms of investment to be really efficient as an organisation.”The chief executives all agreed that investors today face a future quite different from those of their predecessors in recent decades.To navigate this more complex environment asset managers will “need to work harder and be even more innovative . . . operating across traditional silos,” according to Marc Nachmann, global head of asset and wealth management at Goldman Sachs. “More extensive relationships and resources — globally distributed and amplified by better technology — will be increasingly needed for idea generation, deal sourcing, portfolio construction, and value creation,” he said. “These are not small investments to make.”

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WASHINGTON (Reuters) -The U.S. Space Force said on Monday that Elon Musk’s SpaceX was granted approval to lease a second rocket launch complex at a military base in California, setting the space company up for its fifth launch site in the United States.Under the lease, SpaceX will launch its workhorse Falcon rockets from Space Launch Complex-6 at Vandenberg Space Force Base, a military launch site north of Los Angeles where the space company operates another launchpad. It has two others in Florida and its private Starbase site in south Texas. A Monday night Space Force statement said a letter of support for the decision was signed on Friday by Space Launch Delta 30 commander Col. Rob Long. The statement did not mention a duration of SpaceX’s lease.The new launch site, vacated last year by the Boeing-Lockheed joint venture United Launch Alliance, gives SpaceX more room to handle an increasingly busy launch schedule for commercial, government and internal satellite launches.Vandenberg Space Force Base allows for launches in a southern trajectory over the Pacific ocean, which is often used for weather-monitoring, military or spy satellites that commonly rely on polar Earth orbits.SpaceX’s grant of Space Launch Complex-6 comes as rocket companies prepare to compete for the Pentagon’s Phase 3 National Security Space Launch program, a watershed military launch procurement effort expected to begin in the next year or so. More

SEOUL (Reuters) -South Korea’s heavily trade-reliant economy barely averted a recession posting slim growth in the first quarter, but the outlook remained clouded by weak exports due to a cooling global economy, even with China’s reopening.South Korea’s gross domestic product (GDP) in the first quarter expanded by 0.3% over the previous three-month period, official advance estimates showed on Tuesday, compared with a median 0.2% rise tipped in a Reuters survey.Still, economists saw it as little more than a technical rebound after a 0.4% contraction during the final quarter of 2022, which was the first decline in 2-1/2 years, and reinforced their view that the central bank’s tightening cycle is over.”I don’t see any sign of strength from the detailed figures about the future path of the economy,” said Oh Suk-tae, economist at Societe Generale (OTC:SCGLY) Securities in Seoul, adding he retains his forecast for 0.8% growth for the whole year.The biggest contributor to GDP during the first quarter was private consumption, posting growth of 0.5%, while capital investment dented economic growth, dropping 4.0%. Exports rose 3.8%, while imports grew 3.5%.The Bank of Korea said earlier this month that this year’s economic growth would be weaker than its earlier projection of 1.6%, as the central bank left interest rates steady for the second consecutive meeting in a row.Economists now expect the Bank of Korea not to hike interest rates further after having raised them by 300 basis points since late 2021. Over a year earlier, the country’s gross domestic product (GDP) expanded 0.8% during the January-March period, according to the Bank of Korea’s estimates, compared with gains of 1.3% in the prior quarter and 0.9% tipped in the survey. More

While the report maintained the overview of the economy that it was on a moderate recovery, it recognised rising bankruptcies and maintained a warning against global financial volatility it added last month in response to Western bank collapses.The report, crafted by the Cabinet Office, said Japan’s imports are generally staying flat, modifying a previous expression that they were weak, after shipments from the United States and Asia rebounded from a February dip.Trade data out last week showed the hefty cost of coal and oil products, coupled with the yen’s 16.5% slump from a year before, increased imports by 7.3% in March, helping bring Japan’s trade deficit for fiscal 2022 to a record high.The government also said bankruptcies are growing in Japan, having previously said they were staying at low levels. Data by credit research firm Tokyo Shoko Research showed 809 bankruptcies filed in March in Japan, up 36% from the previous month to hit the highest level since June 2015.A Cabinet Office official did not specify causes for the rise in bankruptcies. Analysts have said the end of the government’s COVID-19 relief programme would prompt an increase in small businesses’ insolvency.Elsewhere in the report, the government maintained a reference to the need to monitor the impact of overseas financial and capital market fluctuations.While worries after the collapse of Silicon Valley Bank appeared to have settled, as seen in metrics such as growing U.S. bank lending, the government must stay vigilant against financial market risks, the official told a news conference. More

By Elizabeth Howcroft and Hannah LangLONDON (Reuters) – Crypto firms have been left scrambling to find banking partners after the collapse of three crypto-friendly lenders in the U.S. last month, creating a risk their business will become concentrated in smaller financial institutions.It is a scenario that concerns U.S. regulators, who have expressed doubt about the safety and soundness of bank business models that are highly focused on crypto clients after Silvergate Capital (NYSE:SI) Corp, Signature Bank (OTC:SBNY) and Silicon Valley Bank imploded.      U.S. regulators have also told banks to be alert for liquidity risks coming from crypto-related deposits, which could be subject to rapid outflows if customers try to redeem their crypto assets for real money.Mainstream banks have become increasingly wary of crypto clients following a series of high-profile collapses, including the bankruptcy of major exchange FTX in November last year, and a lack of regulation.”Crypto and Web3 start-ups are telling us they simply cannot get a business bank account,” said Marcus Foster, head of crypto policy at Coadec, a body representing UK start-ups. Foster said the issue has become “significantly worse” recently.This has left digital asset companies with little choice but to seek out smaller financial institutions, some in remoter corners of global finance. A spokesperson for FV Bank, a U.S.-licensed fintech-focused bank in Puerto Rico, said that it has seen an uptick in inquiries from potential customers in recent weeks, even though it is not insured by the Federal Deposit Insurance Corp. The bank does not lend and is therefore not subject to the same type of risks as traditional banks that operate on a fractional reserve system, a spokesperson said.     In Liechtenstein, a spokesperson for Bank Frick said it has also experienced a “significant increase in account opening requests,” with the largest portion of inquiries coming from firms in Europe, Singapore and Australia. However, the bank is not purely focused on crypto and has a broadly diversified business model, the spokesperson said.    Switzerland-based Arab Bank told Reuters in March it had seen an increase in U.S. firms, mostly crypto funds or those involved in crypto venture capital, seeking to open accounts, but that the bank was unlikely to accommodate all of them. While ZA Bank in Hong Kong, a digital bank, said it had seen about four times more enquiries from crypto firms seeking accounts after Silicon Valley Bank’s collapse, although it said it would only accept firms licensed to trade virtual assets.      Nikki Johnstone, a partner at the Allen and Overy law firm in London, said that the “concentration risk” that comes from a growing number of clients seeking business from the smaller firms is the “biggest challenge” of having reduced crypto banking options.”That places a greater degree of expectation on that firm to apply the right level of risk management and monitoring,” she said.     Cryptocurrency companies need access to banks to hold customers’ dollar deposits and for day-to-day business activities.    “Of course the motto of crypto is ‘we are going to replace the banks’, but first of all, we are not there yet, and I don’t think we will be there ever,” said Paolo Ardoino, the chief technology officer of Tether, the largest stablecoin by market capitalisation, whose reserves have previously been the subject of investor scrutiny. ‘TOP TIER’     Several top banks told Reuters that they are currently turning most potential crypto-related customers away, while others said they are only working with top-tier firms – policies that most say are unchanged from their historical positions.      JPMorgan Chase is not onboarding any clients that are primarily crypto businesses anywhere in the world, according to a source familiar with the situation, with the exception of a select few firms including Coinbase (NASDAQ:COIN), which has disclosed that it deposits customer funds at the bank.The person said this policy has long been its stance.    A source familiar with the Bank of New York Mellon (NYSE:BK) said that while the bank examines any crypto company that seeks to become a customer, it is “very, very rigid” in its vetting process and has only taken on clients on a case-by-case basis. Circle, the principal issuer of USD Coin, custodies a portion of its reserves with BNY Mellon.      A spokesperson for ING said the bank does not “target or focus actively on crypto firms” so its exposure is “very limited.” Allen and Overy lawyer Johnstone said that banks are often cautious due to the heightened money-laundering risk in the crypto sector and a lack of robust crypto regulation.    To be sure, some of the largest cryptocurrency companies have ongoing relationships with U.S. banks. Circle, the principal issuer of USD Coin, custodies a portion of its reserves with Customers Bank, and Gemini says it custodies the reserves for its stablecoin at State Street (NYSE:STT) Bank and Goldman Sachs (NYSE:GS) . Coinbase has disclosed that it deposits customer funds at Cross River Bank in addition to JPMorgan Chase (NYSE:JPM).     But for smaller crypto start-ups, securing a banking partner could be more difficult, said Richard Mico, the U.S. CEO of Banxa, a payment and compliance infrastructure provider for crypto. “There’s certainly a concern about a lack of banking partners available in the market now, notably for the smaller and less-proven ventures,” he said. More