Geraldine Gibson-Dautun, CEO of AQMetrics, writes
There is no doubt that the world around us is changing rapidly and never more so than in 2018. This was a transformational year for AQMetrics.
We started into 2018 with the dawn of MiFID II. All of our preparatory work and that of our customers throughout 2016 and 2017 paid off. We successfully went live on the 3rd of January 2018 as an Approved Reporting Mechanism, a Data Reporting Service Provider authorised by the Central Bank Of Ireland under ESMA’s MiFID II. Almost one year on and we still wear our authorisation as a badge of honour. We are proud to be one of the only regulated RegTech firms in existence.
Acquisitions across the industry continued apace throughout 2018. As a direct result, we have seen an increased need for holistic and independent technology solutions in the market. A wave of acquisitive moves in 2018 has led our larger customers to extend their use of the AQMetrics platform, as they scale and deepen their risk and regulatory reporting capabilities.
As firms prepare for Brexit, the movement of investment managers into EEA member state jurisdictions has led to an increase in demand for multi-jurisdictional regulatory risk and reporting solutions. As a result, AQMetrics has broadened its customer base across Europe and has started to be seen as a leader in the regulatory risk and reporting space, particularly in central Europe.
In a world of uncertainty, there is one thing that I am sure of; I cannot predict the future. My team and I have a mission to be a global leader in the regulatory risk and compliance technology space. How we do that depends not only on what we have learned from our past experiences but also on our ability to prepare for future change, even when we cannot predict all outcomes. We look at dynamics and trends that help us navigate the best course for AQMetrics and our customers. Here is a summary of what we expect for 2019 and beyond.
Growth in the financial services sector.
The financial services sector continues to grow despite macro challenges. With nine years of a bull run we think that in 2019 growth will continue in the sector, albeit we recognise that markets work in cycles and at some point the bear will raise its head.
Unfortunately, investment managers have suffered more than the broader market in 2018. But there is some light at the end of tunnel. With fixed income margins holding better than equities and the larger managers continuing to attract new business, we don’t think we will see the bear in 2019. We expect to see most growth in the passive space with global ETF assets having the potential to grow five fold to $25 trillion by 2025. With over 80% of EU and US active funds underperforming their benchmark in 2018, we anticipate that growth will remain more visible on the passive side as we go into 2019.
With an ever flattening US yield curve, a brief inversion of the yield curve in early December and the gap between the two and ten year notes at its narrowest since 2007, one could say that a recession is looming. Looking a little closer at this perception however,the inverted yield curve doesn’t by default cause a recession, it’s merely an indicator. When short term interest rates in the US are inflation-adjusted they are still below 0% and so we predict that the recession will not be hitting in 2019 and most likely growth will continue, albeit somewhat slower than previous years.
Unfortunately we cannot ignore the impact of Brexit. The UK will most likely leave the EU in the next six months. The UK was a major force at the EU financial services regulatory table, and a leading proponent for much of our current market regulation. This will, of course, change from 2019 onwards. Cross-country alliances in financial services will undoubtedly shift and financial services will become more dispersed. We see this already with some of our partners and customers setting up their front office in Paris and back office in Dublin. Undoubtedly the regulators across Europe will be focused on cohesive supervision of these major players.
European capital markets.
With Brexit afoot, we believe that an enhanced European capital markets framework is opening a new chapter for Europe. Of course, the success of the European capital markets will depend upon consumer confidence and trust in the financial services sector. Clearly regulation plays a key role here.
Innovation and the use of technology across the financial services sector is here to stay. We expect to see increased participation by regulators with FinTechs and software firms, as the ecosystem widely adopts the transformational power of technology. AI is moving from a buzzword to mainstream applications as we head into 2019. We also appreciate the need for information security at AQMetrics, which is why we are ISO 27001 certified. We anticipate that many more software and technology vendors will follow suit and place information security at the core of everything they do from 2019 on.
With all of these predictions, what does 2019 hold for AQMetrics? We will continue to offer automated data management and regulatory reporting solutions across AIFMD, Form 13F, Form PF, CPO PQR and MiFID II transaction reporting online 24/7 for self-service customers.
For 2019, we have our eyes firmly set on our customers’ digitisation needs in the performance and risk management space. Our data visualisation tools and configurable dashboards have been well received by our customers through 2017 and 2018, and we will continue to focus on this area. Our AI capabilities, coupled with data analytics and data insights, are providing much needed independent risk systems for our customers. This will continue to be an area of focus.
2018 was a year of awards for AQMetrics. We were delighted to win the ‘Best RegTech Solution’ at the HFM Technology European Technology Awards 2018, the MEDICI Top 21 – RegTech Award and the ‘Best Technology Firm’ at the CTA Intelligence US Services Awards 2018. We have set the bar high for ourselves by being named on the RegTech 100 list for the second consecutive year and we go into a new year determined to do that again in 2019.