With change a constant in the fund administration space, Justin Partington, group head of fund & asset managers at IQ-EQ, outlines how continuous innovation and investment have allowed the company to both meet client needs and respond to new industry challenges…
Increased investor interest in data and reporting, as well as a growing appetite for sustainable investing – not to mention the ever-evolving regulatory landscape – means that change is a constant in the fund administration space. Justin Partington, group head of fund & asset managers at IQ-EQ, outlines how continuous innovation and investment have allowed the company to both meet client needs and respond to new industry challenges…
Can you outline the industry trends which have been driving growth and development within your firm over the past year?
There are several industry trends driving growth and development within IQ-EQ. Firstly, we are seeing increased investor demand for fund managers to meet sustainability and ESG criteria, report on key metrics and also demonstrate improvement in ESG performance over time, as well as increased partnering on technology for a smoother client journey and investor onboarding experience with better access to data and reports.
We’ve also seen a drive towards greater transparency of portfolio data and operating metrics for investors, both in reports and raw data formats, and a desire for a more efficient back-office model to manage costs and apply technology and automation to reduce manual intervention.
Other noticeable trends include the streamlining of service providers to ensure quality of service provision while improving access to technology and data, and increased regulatory oversight and requirements, which have added to the reporting burden for alternative fund managers, including scrutiny of fundraising and fees.
We’ve also seen an expansion of fundraising through a broadening of the range of investor relationships, opening up private markets to (ultra-)high-net-worth families and higher-end retail investors.
The impact of macroeconomic conditions, meanwhile, has tested the ability of portfolio companies to pass inflation onto customers via data, and also manage and forecast cash and banking counterparty exposure to mitigate risk.
In what areas has your firm experienced the most significant growth?
Geographically speaking, the US has been and continues to be a major growth market for IQ-EQ. As a Luxembourg-headquartered business we are well established across the key European markets but have significantly expanded our US operations over the past two to three years through a mixture of organic growth and a number of strategic acquisitions. In 2018, only 3% of our revenue came from the Americas – in 2022, it accounted for 28%, with further growth expected.
In terms of services and specialisms within our Fund & Asset Managers segment, we’re seeing an ever-growing interest in data and reporting – such that we have significantly enhanced our technology offering to include holistic data services (including collection, aggregation and exchange) as well as portfolio monitoring and reporting, a suite of client portals to improve the GP and LP digital experience, and proprietary SaaS compliance platforms.
How have client needs and demands changed what has your response been in terms of your service offering?
At IQ-EQ we’re constantly innovating and investing heavily in product development in line with client feedback, market trends and regulatory developments, ensuring we continue to meet our clients’ evolving needs. As well as the growing appetite for data, investor demand for sustainable investing and the rise of ESG-focused regulations is swiftly shifting ESG compliance from a nice-to-have to a must-have for our clients. We have responded by building out our in-house ESG expertise, establishing new partnerships and expanding our ESG Services offering to support clients’ ESG objectives in full, managing all administrative, data and reporting requirements through the full investment lifecycle.
Are there upcoming regulatory updates which could affect your business and that of your clients?
The only constant is change in today’s regulatory environment! The proposed changes to come with AIFMD II will be a big one for our sector, while post-Brexit, they will create a divergence between EU and UK distribution rules. It’s currently unclear whether the UK’s FCA will impose any amendments to its NPPR implementation.
The finalised draft text for AIFMD II was finalised in January 2023, so it’s expected that changes will only be applicable from 2025 or later. Changes to ESG regulations both in the EU and UK are closer on the horizon.
The EU’s SFDR has been in effect since 10 March 2021, but significant changes are afoot. ESMA’s recent proposals to enhance the fund labelling rules under SFDR were met with concerns from industry participants that overly strict guidelines could undermine the intent of the regulation. The sector has also seen a lot of Article 9 funds ‘downgrading’ themselves to Article 8 amid ongoing uncertainty around sustainability definitions and requirements. And while the EC clarified what it means to be Article 8 or 9 in April this year, a new term – ‘green bleaching’ – is emerging to describe cases where managers following a sustainable investment process choose not to claim sustainability because of SFDR confusion.
In the UK, the new Sustainable Disclosure Requirements (SDR) will come into effect on 30 June 2023, including an explicit new anti-greenwashing rule requiring all regulated firms to ensure that any reference to the sustainability characteristics of a product or service is clear, fair and consistent with reality.
How can you best ensure you deliver value-add to your client base?
At IQ-EQ, we ensure value for clients by proactively listening to them. We’ve been running a global client and intermediary programme over the past couple of years now, which has been hugely successful and informative, so far including 357 of our clients and business partners across the globe. We use this in-depth survey to assess client satisfaction but also to garner insight into what our clients want from us. This insight has fed directly into product development as well as other added-value initiatives such as our Regulatory Eye e-newsletter.
Justin Partington, Group Head of Fund and Asset Managers, IQ-EQ – Justin leads IQ-EQ’s global offering for alternative asset managers, encompassing fund services, regulatory hosting and compliance, and back- and middle-office services. A CFA charter holder and CPA chartered accountant, Justin trained with Deloitte and PwC and has since garnered significant international experience in the alternative funds sector, including senior postings in Canada, the UK, Cayman Islands, Guernsey and Luxembourg. He is an expert in the operation, delivery and marketing of fund and regulatory services in the alternative assets space. He also sits as an independent director on the boards of several real estate and private equity funds. Owing to his expertise, Justin is regularly invited to speak at conferences and publishes articles on the latest industry trends.