Published: November 2016Contents
i) What are the hot topics?
While the global financial crisis of 2007–2008 may feel like an increasingly distant memory, its effects continue to be felt across the whole of the financial world. Despite significant improvements in the global economic landscape in the intervening years, global growth was hampered in 2015 by various geopolitical factors, including a slowdown of economic activity in China, and weakening energy and commodity prices. In the UK, the prospect of the referendum on membership of the EU in June 2016 created an uncertain political environment. The impact of the UK’s decision to leave the EU is expected to be significant, in particular for the UK and across the European continent, but also more widely.
ii) Tell us about any key legal developments – recent or pending – and their international impact.
Asset management industry continues to grow in the context of pensions, as the global population becomes larger, older and richer, and government initiatives to encourage independent pension provision continue.
The activities of the financial services industry remain in the regulatory eye, and the consequences of this focus are manifest in ongoing regulatory attention around the globe. Regulators are continuing to seek to address perceived systemic risks and preserve market stability through regulation.
In Europe, major changes to the regulatory landscape for investment funds were introduced by the Alternative Investment Fund Managers Directive, which has applied in full since July 2014, and more recently by
certain changes to the Undertakings for Collective Investments in Transferable Securities regime. The next key regulatory milestone in the investment business space – the revisions to the Markets in Financial Instruments package – has been delayed by a year, reflecting the challenges for implementation of such significant and wide-reaching regulatory reforms.
iii) What are the biggest opportunities and challenges for practitioners and clients?
It is not only regulators who continue to place additional demands on the financial services industry in the wake of the financial crisis; the need to rebuild trust has led investors to call for greater transparency around investments and risk management from those managing their funds. Industry bodies have noted further moves away from active management into passive strategies, illustrating the ongoing pressure on management costs. The increasing impact of technology on the industry has also been observed, including developments such as ‘smart beta’ management strategies and the nascent emergence of automated (or ‘robo’) advice services.
This continues to be a period of change and uncertainty for the asset management industry, as funds and managers act to comply with regulatory developments and investor requirements and adapt to the changing geopolitical landscape. Although the challenges of regulatory scrutiny and difficult market conditions remain, a return of risk appetite has also evidenced itself.
Stikeman Elliott LLP Montreal
Stikeman Elliott LLP Toronto