20 June 2017
Reporter: Stephanie Palmer
Northern Trust: Investors are taking transparency seriously
Transparency is an increasingly important factor when considering investment into both traditional and alternative assets, according to research by Northern Trust and The Economist Intelligence Unit.

A survey of 200 senior asset management and institutional investor executives suggested that transparency has become significantly more important to investors since before the financial crisis.

The ‘degree of transparency’ was named as a ‘very important’ consideration for alternative investment by 63 percent of respondents. For traditional investments, it was very important for 62 percent.

The survey also found that, post-investment, more alternative investors are concerned about the degree of risk than about the degree of transparency in their investment, while the opposite is true for traditional investors.

For alternatives, 25 percent said the degree of risk is the most important post-investment consideration, while 17 percent said this is the degree of transparency, and 16 percent said it is the degree of liquidity.

However, the report also suggested that pre-crisis, while 21 percent would have considered the degree of risk as the most important factor, only 3 percent would have have been most concerned about transparency.

Similarly, for investors in traditional asset classes, the degree of transparency was the most important factor for 21 percent, compared to 9 percent pre-crisis.

The degree of risk was considered most important by 18 percent, similar to the pre-crisis figure of 16 percent, while the degree of liquidity was most important for 15 percent of traditional investors both pre- and post-crisis.

When asked why transparency has become more significant for both alternative and traditional investment, a vast majority, 73 percent, of respondents cited portfolio risk management as a significant driver.

The second-most cited driver was regulatory requirements, named by 53 percent, and this was followed by competitive considerations, considered a driver by 43 percent.

However, the report noted that there is little industry consensus on who should have the final say on transparency requirements. A third of respondents, 33 percent, said the decision is down to the investment committee collectively, while 20 percent put the onus on the chief investment officer, 15 percent place it on the CEO.

Further, 10 percent said the CFO would have the final cay, and 9 percent put the decision-making down to the chief risk or compliance officer.

The report also suggested that “this lack of overriding consensus cuts across every type of organisation”.

It went on: “No clear pattern emerges overall, indicating a lack of agreed-on best practices in the industry.”

Pete Cherecwich, president of corporate and institutional services at Northern Trust, said: “These results tell us that investment transparency is a growing priority, but asset managers and institutional investors remain unsure of how to best achieve it.”

He added: “As alternative investing has reached the mainstream, the industry would benefit from consistent standards and stronger policies around transparency. Working with the world’s most sophisticated investors, we are committed to enabling greater transparency through continued research and technology development.”

More Industry news
The latest news from Asset Servicing Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Euroclear sees strong H1 asset growth
21 July 2017 | Frankfurt | Reporter: Jenna Lomax
Post-trade service provider Euroclear saw its asset under safekeeping increase by 5 percent to €28.4 trillion in the first half of 2017
Northern Trust commits to EU hub
19 July 2017 | Luxembourg | Reporter: Stephanie Palmer
Northern Trust is set to establish a banking presence in Luxembourg, and has appointed a new head of continental Europe, in a move that it says is “further establishing its commitment to the region”
NSE goes live with Nasdaq surveillance solution
17 July 2017 | Lagos | Reporter: Stephanie Palmer
Nigerian Stock Exchange has gone live with a new market surveillance platform powered by the Nasdaq SMARTS solution
Multifonds: Asset management industry to innovate from the inside
11 July 2017 | London | Reporter: Stephanie Palmer
Innovation in asset management will come from within the industry, rather than from start-ups or disruptors, according to a survey from Multifonds
AxiomSL sees boost from strategic investment
06 July 2017 | New York | Reporter: Stephanie Palmer
Data management and regulatory reporting technology provider AxiomSL has received its first institutional financing, with a strategic investment from TCV
Harmonisation will mean success for T2S
29 June 2017 | Warsaw | Reporter: Stephanie Palmer
More harmonisation and standardisation is required for the market to fully realise the intended benefits of the Target2-Securities platform
70 percent say cyber crime will lead to financial crisis
28 June 2017 | Warsaw | Reporter: Stephanie Palmer
The next financial crisis is ‘highly likely’ to be caused by cyber crime, and the only way to manage this is for the industry to come together, according to a panel session at The Network Forum in Warsaw
More Industry news