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Remote resilience: how asset management firms are maintaining operations through the coronavirus lockdown

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Remote resilience: how asset management firms are maintaining operations through the coronavirus lockdown

By Simon Turner, Wealth and Asset Management Risk & Regulatory Leader, EY

 In the space of just a few short weeks, life as we know it – both personally and professionally – has been turned upside down. The scale of the current economic shutdown, estimated to be affecting one third of the global population, has rapidly reconfigured ways of doing business across the world.

Across the asset management industry, firms will have stress-tested their businesses to withstand plausible severe scenarios as part of broader regulatory requirements in place across the financial services sector. Yet, even undertaking the most extreme stress-testing, many firms may not have modelled the current crisis scenario – a flock of black swans event – which has forced asset managers to set up remote working across the entire workforce in a matter of days. Across the UK, and much of Europe and the US, investment teams, dealers, compliance and other supporting functions are now working from their kitchen table.

Notwithstanding the challenges caused by extreme price action and volatility across financial markets through the course of March, the pace at which firms have had to put plans in place has created high pressure and high demands on operational resilience – and rapid response from teams on the ground.

Business continuity protocols have gone from testing a plan on a page to implementation at breakneck speeds. Over the coming days and weeks, it is critical that firms consolidate their processes around key business functions. We have already seen regulators assessing potential regulatory forbearance in some areas, which will provide some relief to current pressures on operations teams.

Through the lockdown, we may inevitably see some relaxation on processes and regulation demands, but firms must continue to prioritise their monitoring and controls. Whether that is around call taping or regulatory reporting, firms should consider practical alternatives; either taking written notes or adding an additional team member to a work stream for oversight purposes.

Any steps towards regulatory leniency must be justified in the context of potential impact on customer outcomes. Whilst flexibility is understood, firms should ensure that the decisions and actions of today stand up to scrutiny at a future date. Firms will be taking steps to enhance monitoring of practical manual processes and to actively consider – and take measures to mitigate – potential vulnerabilities.

Larger, global firms will have challenges on two sides of the coin; they will be managing major new complexities with differing pace and type of measures across regions, but perhaps they have generally had an easier path towards total remote working over the past few weeks than smaller companies. Firms backed by a flexible, cloud-based infrastructure have not had to pull out as many stops to back up servers, or port their entire business onto a new system. But some – notably smaller firms – have been caught off guard by the pace of the shift and have been peddling hard to ensure their systems remain robust and can function remotely.

Of course, just because we are in the eye of a major storm, it doesn’t mean the existing challenges have simply disappeared. In some cases, they have been amplified. Remote working has elevated the risks of cyber-attacks and fraud alerts, and firms will be looking to prioritise reinforcing cyber defences over the coming weeks.

People management will also be critical through this period. Firms should be carefully considering the impact of potential mental health challenges, and widespread illness within their workforce, with the government projecting absence rates in the region of 20 per cent. In some roles, prolonged absence will present key person risks. Firms should consider how roles and responsibilities are cascaded when key individuals or teams are affected – and test third party administrators and providers, whether custodian banks or risk oversight firms, on a similar framework of key risk responses. We talk a lot about operational resilience being critical for businesses if they are to emerge intact at the other side of this crisis, but we mustn’t forget how important ‘people resilience’ is in all pulling through this together.

Through the operational challenges ahead, asset managers must consider how the new environment is affecting their workforce, not merely in their ability to carry out their day-to-day roles, but from a wellbeing perspective. Connectivity is paramount and helpfully, there are a wealth of collaboration tools available to help keep teams connected and joined up. We are seeing current efforts focusing on using technology to maintain wellbeing, a sense of community and productivity. With little clarity on how long the current shutdown may last, people must keep talking to each other to manage their day to day challenges as a team, and do all they can do ensure it’s not a case of thousands of individuals logging on in isolation every day. Many people may struggle to step away from their screen and end their working day given all aspects of life are in the same space. It is critical for people to remember to practice social distancing from their laptop and ensure that time away from work is more than just physically closing the laptop lid.

As we adjust to the new ‘far from’ normal, asset management firms should consider how they will look back on this period in the future. In the years to come the industry must be able to reflect in the knowledge that they did everything in their power to act in both employees and customers’ best interests. The industry’s collective efforts must be focused on investor outcomes and market stability – the pillars of our industry’s promise to customers and society more widely. It is vitally important that firms think about how they are building resilience with these end goals in mind.

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Reuters Events Launch Global Investment Summit Online Edition Uniting Institutional Investors, Asset Owners & Financial Institutions

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Reuters Events – today announced the agenda for their Global Investment Summit (Dec 3rd -4th). The 2-day strategic summit has been reimagined in the era of social distancing and will be broadcast free of charge to the public.

This Summit, with a diverse range of international voices and anchored by Reuters News-led sessions, is the only place for institutional investors, asset owners and financial institutions to come to terms with the events of 2020.

Click for more information and for complimentary registration to the online edition

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Eileen Murray, Chair, Finra
  • Philip Lane, Chief Economist, European Central Bank
  • Gregory Davis, Chief Investment Officer, Vanguard
  • Hanneke Smits, CEO, BNY Mellon Investment Management
  • Pascal Blanque, Chief Investment Officer, Amundi
  • Desiree Fixler, Group Chief Sustainability Officer, DWS
  • Joe Lubin, CEO, Consensys
  • Bahren Shaari, CEO, Bank of Singapore
  • Mark Machin, CEO, Canada Pension Plan Investment Board

The agenda released by Reuters Events Investment is both ambitious and comprehensive, and will cover four key themes: Market Outlook, Asset Management Strategies, Industry Deep-Dives and the Future of Investment.

View the full agenda here

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Halliburton & Baker Hughes CEO’s join Reuters Events: Energy Transition 2020

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Reuters Events – today announced that CEO’s of two of the world’s leading energy service companies, Halliburton and Baker Hughes, will join the speaker faculties for their flagship Energy Transition Summit.

The event will explore the creation of the future energy ecosystem and offer companies, from across the asset spectrum, a definitive guide to their net-zero strategies. The alignment of the two biggest O&G global service companies, Halliburton and Baker Hughes, represents a significant step in the transition to low-carbon energy

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Alongside their CEO speaker representation, Halliburton join as Platinum sponsors of the North American edition. Baker Hughes join as gold sponsors for the European edition of the flagship energy transition program.

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Lorenzo Simonelli, Chairman & CEO, Baker Hughes
  • Jeff Miller, CEO & President, Jeff Miller
  • Tristan Grimbert, CEO, EDF Renewables
  • John Pettigrew, Chief Executive, National Grid
  • Pratima Rangarajan, CEO, OGCI Climate Investments
  • Alex Schneiter, CEO & President, Lundin Energy
  • Gretchen Watkins, President, Shell Oil Company
  • Calvin Butler Jr., CEO, Exelon Utilities
  • Francis Fannon, Assistant Secretary ERB, S. Department of State
  • David Lawler, Chairman & President, bp America
  • Andreas Schierenbeck, CEO, Uniper

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Governance & Cooperation – Does the energy transition face a ‘governance deficit’? To understand how the energy transition will develop over the next decade, it is crucial to understand the driving governing forces behind it. Will the Green Deal provide the first domino, how can we ensure progress in the shadow of Aberdeen and ensure that we translate targets into action?

Financing Energy Transition – We must address the elephant in the room; who is going to pay for it all? An understanding of where the funds are likely to come from is key to staking claim to the infrastructural projects that will redefine the modern world in the 21st century.

New Energy Infrastructure – Low-carbon energy supply and consumption will need a radical overhaul of infrastructure. As well as revamping the old, we’ll need entirely new assets and new systems of energy delivery. It’s an unprecedented opportunity with estimated spending at $70 trillion over the next decade. Knowing which technologies are ready to be scaled first is the key to understanding opportunity

Business Model Innovation – Who will provide leadership through the age of transition and how do we want our future energy system to look? Speed and timing will be crucial if you are to stay on the right side of the transition. Join us in setting business led, evidence based, targets as industry drives towards net-zero

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

At Reuters Events, we’re committed to tackling the Energy Transition head on; to shed light on the defining issue of our time and help energy companies meet a uniquely difficult challenge. That is, to be both an energy company of today, and the energy companies of tomorrow. In a period that will be defined by uncertainty we can, together, lighten the way forward.” – Owen Rolt, Head of Energy Transition, Reuters Events

Contact

Owen Rolt

Head of Energy Transition

Reuters Events

UK: +44 (0) 207 375 7596

E: [email protected]

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COVID-19 is changing people’s preferences when it comes to BTL investments

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COVID-19 is changing people’s preferences when it comes to BTL investments 1

By Jamie Johnson, CEO of FJP Investment

Throughout 2020, investors have had to navigate increasingly treacherous and volatile market conditions as a consequence of the COVID-19 pandemic. No country has been immune to the coronavirus outbreak, particularly here in the UK.

Yet even as the country enters another phased lockdown of sorts, demand for UK property has remained strong. After a brief period of suppressed demand after initial lockdown measures were introduced in late March, the UK’s implementation of the stamp duty land tax (SDLT) holiday triggered a rush in demand for bricks and mortar. As a result, both house prices and transactional activity is rising.

With this new surge in demand resulting in an 18-year-high of UK house price growth, according to the Royal Institute of Charted Surveyors, buy-to-let (BTL) investments have also substantially increased in popularity.

It’s easy to understand why. BTL investments offer landlords both long-term capital growth and regular returns in the form of rental payments. And now, as the SDLT holiday deadline beckons closer, investors keen on taking advantage of the comparative discounts on offer must act quickly.

My advice to those considering a BTL investment in the UK is to understand and appreciate the longstanding market changes that have been brought about by COVID-19. Traditional BTL hotspots are being challenged by a rise in tenant demand for real estate in up-and-coming cities and regions.

For example, the COVID-19 pandemic has resulted in the majority of the workforce working remotely from home. Recent data from property listing site Rightmove makes clear the shift in demand away from central London and towards less densely populated regions; with areas like Cambridge and Oxford seeing 76% and 64% more rental searches respectively and searches in areas like Earl’s Court dropping by 40%.

This is the clear result of previously London-based professionals realising the benefits of working from home. As businesses identify the financial drawbacks and COVID contagion risks of having all their staff physically present five days a week, employers will seek out smaller commercial workspaces.

At the same time, we are also seeing workers looking to rent larger, cheaper properties that might be further away from their office. This is due to the fact that they are unlikely to need to commute every working day to their office, even once the COVID-19 outbreak has been contained.

But, where exactly are the best larger, cheaper properties to be found? Where are the UK’s emerging BTL hotspots that need to be on the radar of prospective investors? I explore these pertinent questions below.

Liverpool life

Those who have been closely following the UK’s housing market will know just how primed Liverpool is for BTL investment. As a key recipient of the UK Government’s Northern Powerhouse funding, and with massive developments like Liverpool Waters and Wirral Waters soon to be completed, the city’s housing supply is ready to meet the demands of those taking part in the aforementioned London professional exodus.

With Liverpool constantly ranking No.1 in rankings of UK cities for BTL investment, it’s evident why investors would be keen on completing purchases of Liverpool property before the end of the SDLT holiday. Though even after the SDLT holiday ends, there’re still plenty of reasons to be optimistic about Liverpudlian BTL investment. Prime Minister Boris Johnson’s government is firmly committed to ‘levelling up’ the North of England through regional regeneration, and planned high speed rail connections between Liverpool and other northern cities will only add to the investment potential of the city.

Leeds living

Although Liverpool boasts the highest rental yields for BTL landlords in real terms, Leeds was recently named the most profitable city to become a landlord in the whole of the UK by CIA landlord. By evaluating numerous metrics; including mortgage costs, average rent, average monthly landlord costs and average property prices, they determined that Leeds was the best city for potential buyers to make their first foray into BTL investment.

And, looking at recent trends, it’s easy to see why. Leeds may benefit more from the London exodus than other cities due to its unique position of being a brain gain city’, i.e. one where more students remain after graduation than move away. As a result, it boasts the largest financial services sector in the nation after London, making it an ideal locale for employers in the financial services sector who are seeking cheaper commercial rent outside of London; likely bringing investment and employees with them.

With its strong urban economy likely to be bolstered by its designation as a ‘Northern Powerhouse’ leading business hub, Leeds is ideally positioned for BTL investment over the long-term.

Cardiff’s regeneration

And finally, the capital of Wales brings much to the table when deciding between different BTL investment destinations. With a metropolitan area population of over 1.1 million residents, forecasted to grow by 20% by 2035, demand for property in the city is set to rapidly increase over the next decade. Those able to capitalise on this population growth will be able to access considerable long-term investment opportunities – as recent reports suggest.

Thankfully, it’s unlikely that there’ll be any shortage of housing supply in Cardiff for BTL investors to invest in. Cardiff Bay has emerged as Europe’s largest waterfront development, and the upcoming Central Quay and £500m coastal developments will assist in attracting further investment into the city.

BTL remains a sound investment opportunity

COVID-19 has made evident just how resilient British real estate is as an investment asset. By offering the best of both worlds, namely long-term capital growth and regular rental returns, BTL has successfully remained an attractive and popular investment choice. And, with demand for housing still outstripping supply, the market need for rental accommodation looks set to only grow.

COVID-19 has permanently changed the UK’s housing market and, as explained above, new BTL hotspots are surely due to emerge over the next year. With renters seeking out larger homes in cheaper areas, flexible working patterns will forever change the landscape of the UK’s residential real estate market, and those able to capitalise on it may benefit hugely as a result.

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