How asset owners are adapting to new regulatory and client demands: A conversation with Meradia

Mick Cartwright: Competitive pressures, emerging regulations and the need to generate low-fee, risk-adjusted returns make passive investing increasingly prevalent among asset owners. For example, the Australian Prudential Regulation Authority (APRA) performance test requires funds to meet specific benchmarks. If a fund underperforms for two years, it’s closed to new members and assets are transferred to better-performing funds.

Ian Hissey: Australia’s collective defined contribution (CIDC) pension scheme is more easily regulated than individual schemes in North America or Europe. Other countries, like the Netherlands and the United Kingdom, are considering similar models to relieve pressure on state pensions and defined benefit funds. Transparency and fiduciary responsibility are becoming global priorities as more countries look to Australia’s success.

Peter Sherriff: The biggest challenge is around data — its timeliness, availability and granularity. Many pension funds rely on accounting data for investment decisions, which doesn’t always align with how investment professionals manage money. There’s often a delay in getting information from third-party managers, and private assets lack global data standards. Asset owners lean heavily on service providers like State Street to solve these problems efficiently. For example, where one fund might build a large internal operations team to manage data, another might leverage a provider such as State Street’s capabilities and need far fewer people to get the same work done.

Peter: Alpha’s servicing side helps by integrating with asset managers globally, absorbing transactional flows as they occur. This enables asset owners to update their portfolios in near real-time. While some clients initially want constant updates, most find that intraday updates are sufficient. The key is providing an up-to-date view of positions and cash for investment teams, while middle-office and performance teams need end-of-day data for reporting.

Peter: They’re complementary. A total portfolio view provides the data and tech foundation for a total portfolio approach, which is more about risk budgeting and driving returns. Some asset owners use proxies and approximations for parts of their portfolios, focusing only on what’s material. The goal is to be “roughly right” all the time, rather than perfectly accurate, because portfolios are constantly changing.

Ian: I agree. Managing a portfolio often means using proxies for unlisted assets and focusing on actionable levers, like currency exposures. Real-time data isn’t always possible or necessary for every asset class.

Peter: Most funds have set up distinct business units that operate in isolation, competing for capital. Breaking down these silos requires either internal or external impetus — like APRA’s regulatory pressure or driven leadership. Successful firms bring in people who understand collaborative, cross-asset management and are willing to think about the bigger picture.

Mick: I would add that traditional asset classes have little incentive to change, but chief investment officers and risk teams want holistic views. Achieving a total portfolio view is operationally complex but extremely valuable, especially when working with strategic partners rather than arm’s-length vendors.

Peter: Strong executive leadership and true strategic partnerships are essential. As an example, one of our clients delivered a total portfolio view in nine months by relying heavily on State Street as their sole custodian and involving all relevant teams — front-office, tax, unit pricing and performance — in the process. Collaboration and clear objectives made the difference in this success story.

Peter: Pension funds worldwide regularly share information and learn from each other. Events bring together Australian and Canadian funds to exchange ideas. The more we talk and share knowledge, the better prepared we are for client conversations and industry changes.

Mick: Legislation in Australia has pushed organizations further along this path than has happened in the United States. There’s much to learn from the Australian model, especially as private asset allocations grow and more assets are managed internally.

This dialogue underscores how regulatory reform, data management, and technology are reshaping investment servicing and portfolio management. Success in this evolving landscape depends on a firm’s ability to adapt to new standards, leverage timely and granular data, and foster collaboration across organizational boundaries.

Ian: While perfection is rarely attainable, pragmatic approaches that focus on material issues can drive meaningful progress. Above all, open knowledge-sharing and strong partnerships, both internally and with service providers, are essential for organizations to deliver better outcomes for clients and remain competitive in a rapidly changing industry.