Adaptability was the most repeated term at the first panel discussion at the FundsPeople event on The Future of the Depositary. Alternative assets are attracting the interest of all the stakeholders involved in the asset management industry. And no wonder, since both our past and the current environment lead us to look to other assets to provide the returns that traditional assets were not and are not providing. Their foray into the industry is not without new demands and responsibilities. Changes which, in the case of the depositary sector, have a major impact on their custodial and oversight work.
The panel, moderated by Gregorio Arranz, Secretary-Coordinator of ADEPO, focused the debate on the role of the depositary faced with the growth of illiquid assets, their constant adaptation, the areas of work that have been most affected and in which products they are seeing the greatest demand.
The role of the depositary
All the panellists agree that we are dealing with a very heterogeneous and dynamic sector with many ideas. In this scenario, "the added value goes beyond the norm. It is important to understand what fund managers want to do, adapt to the needs of their clients", says Felipe Guirado, Head of Sales for Spain and Portugal at BNP Paribas Securities Services. He points out that the size of the entities is very important. He highlights the consolidation process as a strength of the sector. "Being global entails acquiring more information, which is very important when it comes to providing services to fund managers", he explains.
Knowing how to adapt also implies changes in procedures. But in this aspect, "the depositary offers a great deal and the mere existence of its figure alone strengthens the system", says Aurora Cuadros, Corporate Director of Securities Services at Cecabank. Adding that "the oversight action of the depositaries enables fund managers to comply with their obligations towards the regulator. Governance towards those who have all kinds of obligations; and operability to protect the interests of clients". In short, in the words of Cuadros, the aim of the depositary is to "strike a balance".
Change in the type of investment
We are facing an environment that bears no resemblance to what it was a decade ago. In this regard, María Dolores Domínguez Haro, Head of Depositary Services at BBVA, comments that, "although the depositary does not play a direct role in this type of asset, being aligned with the supervisor and implementing an enriching supervision system is a guarantee for the stakeholder behind this type of vehicle". According to Domínguez Haro, "the teams' expertise and technological experience will enable the figure of the depositary to play a relevant role in all aspects related to alternative assets".
In this regard, Alejandro de los Ojos, Director of Sales and Customer Relations at CACEIS Bank Spain, explains that "the progressive change that has been seen in client portfolios, accompanied by a new type of investment, is here to stay. Depositaries have had to strengthen their procedures and services in order to offer asset custody and depositary services that we were not accustomed to having 10 years ago".
Where does the interest lie?
The panellists agree that the key will be to provide our clients with the tools to make ESG decisions.In recent months, interest has focused primarily on investment with an environmental component, decarbonisation... But there has also been interest in real estate and financing or debt funds, which have come to replace bank financing.
However, what is perceived, according to Alejandro de los Ojos, "is that these new structures embrace and have an ESG component. Both when investing directly or via investees".
Technology as the main driver
Technology has played an important role in providing the adaptability that was discussed throughout the panel. The present volatility has led to an acceleration of technology for depositaries and fund managers, where the depositary industry has had to accelerate many investments.Everyone agrees that the industry has shown itself to be mature and prepared with contingency plans that have worked. But we are facing an ongoing process, as María Dolores pointed out, "there is a need for depositaries to adapt to the emergence of new products such as blockchain".
In this regard, the event featured a presentation on cryptoassets by Carlos Navarro, Head of Blockchain & Digital Assets at Deloitte in Spain. The expert noted that "although it is not a regulatory requirement, there are similarities between the custody of financial instruments and the custody of cryptoassets. To do so, depositaries need to acquire/develop technological capabilities to provide such services".
According to the data presented, in recent years, the digital custody market has increased significantly (+ 600% since 2019), generating an increasing interest among investors in financing the development of these businesses.
