Francisco Aristeguieta explains how the COVID-19 world is a more volatile and unpredictable place for asset managers looking to grow internationally.
Now more than ever, he says, institutional investors need a strong partner on the ground like State Street with local talent and global scale to support their data, technology and operational requirements in a world in which the rules of international engagement are being rewritten.
Why is it more challenging today for global institutional investors to establish a foothold in high-growth markets in Asia, Latin America, Africa and the Middle East?
Even before the pandemic, there was a sense that the world as we knew it had changed forever. The globalization tailwinds that helped international businesses over the last 30 years are turning into more nationally focused headwinds. The global institutions and tools that previously managed conflicts are being challenged by new populist leaders around the world.
Multilateral cooperation is being overtaken by bilateral action and shifting alliances: economically, politically and militarily. In a more nationally focused world, the risk of conflict is high and the range of unexpected outcomes for businesses is much wider. The world has become more fragmented, more contentious and more complex.
What does that mean for asset managers wanting to grow internationally?
Step one is acknowledging that business as usual will no longer be effective. Global companies need to recognize that conflict resolution in the future might look very different than it has in the past. The balance of risks is to the downside, for as long as the institutions for managing those risks are transitioning. In recent decades, building an international presence in high-growth markets was almost easy. In the decade ahead, it will be much harder.
The next 10 years will require new tools for establishing footholds in new markets. Establishing a successful international presence will require a much more intensive commitment to understanding local legal and regulatory frameworks and a greater investment of time and treasure to hire local talent and align operating models to local stakeholder demands. Firms will need to be more nimble as the world moves away from global integration toward national siloes. Therefore, choosing your partners carefully will be more important than ever.
How is State Street responding to these new challenges?
We are investing in our existing global capabilities to match the growth ambitions of our clients. In many ways we are already well positioned to help our clients grow. We have a well-established brand and a long-standing foothold in many of these countries with seasoned talent on the ground. More importantly, we can provide asset managers with the ability to scale internationally without having to build their own infrastructure locally. For most asset managers, building a data center for their own use in a particular country is simply not practical or cost-efficient.
State Street can become that connected network for clients in a way that delivers a consistent and reliable experience regardless of where they are operating. Providing a wider range of operational, data and technology support also transforms our relationship from being a vendor to being a strategic partner.
Operational nimbleness and reliability are becoming increasingly important in an uncertain world. Our response to the coronavirus pandemic demonstrates that we could shift and manage our processes while providing stable and reliable support even in the most unpredictable of circumstances.
Clients are eager for that access to scale, productivity improvement, data insights and consistency of experience wherever they do business. Every single client meeting I have refers at some point to a desire to expand internationally, to enter a new market, or to launch a new product, fund or distribution platform in a foreign market. These are all goals that involve multiple geographies, multiple capabilities, multiple operating systems and require the ability to better leverage their data even in markets in which there are significant data-movement restrictions. Harnessing the full range of our global capabilities can drive unprecedented scale for our clients, and we want to build on those strengths to support our clients’ future growth.
Ultimately it is about talent. We are investing in attracting the best talent in each of these international markets so that we can offer our clients the most incisive local insights and experience that will support their success and facilitate access to our full range of capabilities, regardless of the region. We are dedicated to creating a high-performing organization in each international market that is equal to the growth ambitions of our clients. In this uncertain and highly volatile world, local expertise and global scale will be mission-critical for institutional investors looking to grow in the decades ahead.