IIFA Chairman Cummings: Those who master new technology will have a competitive edge

As the International Investment Funds Association (IIFA) conference, held in Cyprus for the first time this week, comes to a close, Chris Cummings, IIFA Chairman discusses the impact of global economic unrest on the funds industry.

Also the Chief Executive of the Investment Association (IA), the UK investment industry’s trade association, Cummings, in addition, talks about navigating the ESG landscape and the radical changes that artificial intelligence is likely to bring to funds and investors alike.

Thinking about life after the current inflationary turbulence, do you anticipate any significant changes or shifts coming to the funds industry?

Like other industries, the global investment management industry feels the impact of global economic uncertainty. As governments and investors continue to deal with inflationary pressures, geopolitical uncertainty, fast-paced technological advances and the post-COVID economic outlook, our priority remains serving the needs of investors, so that our clients are able to meet their long-term savings goals. We continue to work at pace on key developments in regulation, including changing expectations in sustainability, while seeking to correct the views of some policymakers that our industry is a major source of financial stability risk. We are focused on helping the industry spur innovation and adapt to new market conditions. The International Investment Funds Association (IIFA) can help in this endeavour by showing the value of international coordination to unlock further investment and growth and share good practices.

The International Sustainability Standards Board has recently introduced its inaugural sustainability standards. What is the significance of this move for the funds industry and how is it likely to shape ESG-focused investment decisions?

We recognise the crucial role that the International Sustainability Standards Board plays in shaping the future of corporate reporting. As we navigate a complex and interconnected global economy, the need for robust, reliable and consistent sustainability standards has never been more important. As a result, it is crucial for investment managers to have access to meaningful and comparable sustainability reporting, which will allow them to appropriately factor sustainability risks and opportunities into the investment process, including investment and stewardship decisions.

Do you envision any challenges or complexities for fund managers in following these standards?

A key challenge will be for the standards to be endorsed and used by companies globally. We welcome the IOSCO endorsement of the standards and hope that individual jurisdictions and companies decide to follow suit, so that they soon become Global Sustainability reporting standards. For fund management companies reporting against these standards, the key challenge will be having the right systems and data collection mechanisms to collect relevant information to report. This is the same challenge that all companies will face and we hope that those companies already reporting against the Task Force on Climate-related Financial Disclosures (TCFD) framework will have a head start, given the commonality between the ISSB and the TCFD’s four pillars. As global investors who invest in companies and assets that are based and operate around the world, firms in our industry need to consider the various sustainability issues across different geographies. The IA will continue to work with its members, regulators and other stakeholders to shape the future of sustainability-related financial disclosures.

Turning to technology, what role do you foresee for artificial intelligence in the asset management industry, particularly in areas such as portfolio management, risk assessment and client engagement?

The industry is going through a radical, fast-paced re-evaluation of the opportunities and challenges that new technologies such as artificial intelligence and quantum computing will bring. These aren’t developments that will affect the industry in some far-off future but instead are making us rethink operating models, investing practices and, indeed, operational resilience today. The opportunity to draw upon new data sets faster and with greater insight offers exciting new investment perspectives but with this come new risks, as with all emerging technology. Whatever your view of where we are on the hype curve, this new technology isn’t going away and those who master its uses will have a competitive edge. Clients will be demanding greater personalisation and, whether institutional or retail clients, will want solutions that meet their specific needs (at a time and in a way that is personal to them). This will also offer opportunities for cost-reduction and operational efficiency gains over the medium to long term. However, as every business knows, the technology race is expensive and that is why those who can find lower costs and improve margins will thrive.

As newer generations enter the funds industry, both as investors and managers, how do you see their expectations of technology-driven services changing the landscape?

Our industry recognises the crucial role of innovation and technology-driven services in spurring economic growth and its importance for the investment management industry in meeting client demands in the retail and institutional environment.

At the IA, we are committed to enabling our industry to embrace new and innovative technology. We are particularly proud of the IA Engine Programme – the first Buyside Fintech Hub that works with over 150 fintech firms and partners across the investment value chain to support the adoption of tech-driven solutions in our industry. We also need a much more modern, fit-for-the-future disclosure regime to ensure that investors get the information they need in a way that empowers them to make investment decisions. In our view, disclosure should be “digital by default”.

This year, the International Investment Funds Association (IIFA) conference was hosted in Cyprus for the first time. What is the significance of this event for the local investment funds industry?

The IIFA’s Annual Conference brings together senior leaders from across the global investment funds industry and is a unique opportunity for representatives from the IIFA’s 42 national associations to share good practices, discuss regulatory issues across different jurisdictions and identify ways to improve the industry’s offering to savers and investors around the world. IIFA members represent an estimated AUM of US$63.01 trillion at the end of Q1 2023. I was delighted to be able to visit Cyprus as part of the IIFA’s global conference and I am grateful to my colleagues at CIFA for hosting this year’s conference and showcasing everything the Cyprus funds industry has to offer.

Finally, going forward, what are the IIFA’s key focus areas and priorities?

Recognising the importance of the role of investment funds and their responsibilities to investors, the IIFA’s mission is to promote the protection of investment fund investors, facilitate the growth of the investment funds industry internationally, act as a medium for the advancement of understanding of the investment fund business around the world and encourage adherence to high ethical standards by all participants in the industry. The IIFA aims to share good practices and improve understanding of local regulatory developments at a global level. Following a recent member survey, its key priorities for the coming year relate to fund regulation and governance challenges, financial stability, sustainability, digitisation and the adoption of new technology by the industry and operational and cyber resilience.

This interview first appeared in the October edition of GOLD magazine. Click here to view it.