This article appears courtesy of Global Investor.
GLOBAL INVESTOR: Do you see regulatory requirements becoming more onerous? How should asset managers respond to this?
Hendrik Du Toit, Investec Asset Management: I really hope not. Regulators need to understand this particular industry as opposed to insurance and banking. Asset management is an industry in its own right. I would like to see a period of regulatory stability ie, some peace and quiet.
Philippe Collas, Socgen: While it is true that regulation exists to better protect investors, the cost of compliance is killing the smaller guys in the industry. It's working against innovation. We need regulation, but I think we have enough of it now. We have to be very cautious and ensure the regulators are not intervening so much so that it hampers our growth.
Jeremy Grantham, GMO: Yes, it's been a lot of headache and effort. Regulation may become a handicap for small boutiques because those firms with economies of scale can bear the burden of increasing costs.
Blake Grossman, BGI: It's virtually inevitable that regulatory attention and demands will continue to increase. That will increase the cost of being in business and create diseconomies of scale for smaller asset managers. But if asset managers are genuinely aligned with what they need to be doing to deliver for clients, and ethical standards are embedded in the DNA of the organisation, regulatory requirements shouldn't really be onerous. If you have the integrity built in, regulatory requirements are a side-show.
Chip Mason, Legg Mason: A problem facing asset managers here is whether to outsource the risk or not. But the bigger problem is that regulation is created by politicians. They make their decisions on where the votes are, and how it is viewed by constituents rather than whether it's right or wrong. But the average person has no clue what will or won't work.
Joachim Faber, Allianz Global Investors: We have to remind ourselves that we are in the trust business, as people are entrusting us with their wealth. Obviously, regulators have to be asked to step in to scrutinise the actions we [collectively] take. The best thing to do is to take each new issue as it comes and act accordingly to ensure we are promoting the highest standards in the industry.
Nicolas Moreau, Axa: The regulators are there to protect investor interest. Having said that, the costs are rising in keeping with new regulation, particularly in our efforts to ensure compliance is top-rate. I'm going to be optimistic and say that we as an industry will push hard for a low cost, but efficient, means of protecting the client.
Todd Ruppert, T Rowe Price: While we hope that the pace of new regulations will slow from the torrid pace of the last several years, that is probably wishful thinking. Taking a breather to evaluate how new regulations actually have impacted asset managers and their clients would be a good thing for regulators to do.
Ray Dalio, Bridgewater: Regulatory requirements have been very light. It is natural for a manager to want no regulation. But there are also some bad and incompetent managers out there. The truth is that if regulations are made to work well – and so far, they have been – then you will have a good business.
Ted Sotir, GSAM: I'm all for management directives but not for interpreting them in different ways in 14 different countries. This will not create the scale in the business that helps keep costs lower for investors.
Jack Brennan, Vanguard: Just this century, we've seen how important image and reputation are. Scandal-free firms have done better, both in investment banking and asset management. Being compliant and focusing on integrity has proven to be important. It's not just about meeting the letter of the law, but about exceeding it. You'll find that parties will increasingly only want to do business with firms that they think will never embarrass them, and that will be important to winning business in new markets.