since the financial crisis markets have
slowly but inexorably been changed by
regulation what does it mean for one of
the markets biggest actors asset
managers with me to talk about it is
Arjun Singh Michelle senior adviser and
capital markets at the investment
Association Arjun welcome so what is the
cumulative impact of all these layers of
regulation well insofar as a biocide is
concerned there are there been to
unintended consequences one in regards
to monetary policy and the low interest
rate environment if you look at from two
thousand seven or eight once once
interest rates had gone down there we on
the buy side had record sales of
fixed-income funds so we've been
increasing our holdings of corporate
bonds and sovereign bonds and so on but
one of the other unintended consequences
of Prudential Regulation placed upon
banks has led to ad risking and a
deleveraging of bank balance sheets
precisely in corporate bonds and
sovereign bonds this has led to an asset
class mismatch between the buy side and
the sell side if it's becoming a bigger
part of the market earning more revenues
fries does this by definition make the
industry systemic it's always important
to recall that the revenues generated by
sin managers and markets are not
revenues for asset managers they are
returns generated by our clients
revenues generated by so managers come
from the sales of funds now the systemic
question as institutions and businesses
as a managers are not systemic and the
reason for that is if you look at the
balance sheet of an acid manage and
compare that to the balance sheet of a
bank a bank's balance sheet is normally
a multiple of an asset managers balance
sheet and the reason is that the assets
managed by an asset manager do not sit
on our balance sheet they are held in
segregated accounts by a by a custodian
and what that what that means is that
were an asset manager company to go down
a client assets would never be touched
that does not mean to say that we do not
bring any sort of risk has any economic
agent on financial markets we bring a
certain element of risk but then those
those market-based activities are or
will be mitigated by method
going forward and some of the other
areas globally with that regulator
looking at of course is where you can
never run on a fund I use it is a great
European success story and one of the
tools provided uses is to manage a a
Redemption now if the banks are moving
out of the market you're becoming a
bigger part of the market there's
opportunities there too maybe
participate directly maybe get out with
with a counterparty and bypass that
intermediary but what what are some of
the trade-offs here one of the bigger
trade-offs that we've met that we see in
financial market is of course market
data what this assumes is that there's a
quality of access to market data and the
quality the ability to pay for market
data now if you use the equity markets
as an example the price for market data
had been rising for a number of years
now where the revenue generated for
example by the London Stock Exchange and
from market data non-transactional
services and is now a greater proportion
than it's ever been previously now have
this modern was applied to fixed income
this would increase frictional costs for
asset managers would have a direct
impact on the revenues that we can
generate for our clients Arjun thank you
very much thank you