Cash management, compliance and the value of outsourcing
Since March 2022, the Fed has raised interest rates numerous times, and has signaled that there are further increases to come. A decade of almost zero rates caused many firms to downsize or even dismantle trading desks that had become uneconomical. Suddenly, cash management is a revenue generator instead of a cost center, and many asset houses lack the expertise to take advantage of it: they no longer have an internal solution, and it would take time and money to rebuild.
Global service providers offer the full suite of cash-management products across multiple platforms. And because they have never left the business, they are also data rich. They have the historical market data that improves decision-making, and the client data that gives them a holistic overview of the entire portfolio – including segregated accounts.
“Earning spread on your idle cash has become critical,” said Curley. “We’ve played a significant role in pulling together the data across a client’s book to get them what they need to maximize every dollar.”
Data collection also helps with transparency, which is increasingly important. Clients today are demanding. They want to know where and how their money is invested, and what and where the risks are.
Since the global financial crisis, the regulatory and compliance burden on asset managers has increased and evolved. Major financial institutions have gone from having a compliance officer to an entire department. For all but the biggest institutions, this can be a substantial financial drain, so outsourcing reporting to a dedicated team of experts could be a valuable solution. This would reduce any fear of falling behind new regulation, and asset managers would be reassured by having a team available to create every report and meet every deadline.
“It’s all about taking that operational burden of investors, regulators, daily data off their plate,” said Kevin Weeks, global head of business development for U.S. Bank Global Corporate Trust and Custody. “Essentially, what we’re trying to do is give the investment manager the ability to make a better decision – a more informed decision.”