Asset managers are going through unprecedented change. Relationships with servicing partners are evolving. We go behind the scenes to speak to asset servicing experts and find out what’s really important for asset managers, what’s changing, and who’s involved in transforming their business, together.
In Episode 3 we look at the topic of fund design and distribution – and risk. Fund managers are developing and distributing an ever-increasing variety of funds, across ETFs, blockchain-based models, and more. What’s driving this momentum? And how should managers approach the changing and emerging risks involved – how can asset servicing partners support their risk management? We speak to Shany Venon, Head of Institutional Investors Client Line, Luxembourg, Ireland & the Channel Islands, and Mounir Zahraoui, Head of Operational Risk, to look at both sides of the discussion.
Annie Blouin: Hello, I’m Annie Blouin. I’m the Global Head of Relationship Manager and Client Services at BNP Paribas’ Securities Services business. And welcome to this episode of our podcast series Beyond the Trade, where we go behind the scenes to speak to our asset servicing experts and find out what’s really important to our asset managers.
In this episode we’re looking at the topic of fund distribution, diversification, and the new kinds of risks this presents for asset managers. Diversification has always been an important topic in our world, but in recent years, the varieties of funds that managers are building, the way these are being distributed, has changed massively. But what’s less talked about are the risks that this presents. How can asset managers build these products in a world full of risks, especially where the risks are part of the opportunity?
It’s really a fascinating topic, and not an easy one, so I’m delighted to be joined today by two of our experts from Luxembourg, Shany Venon; Shany is the Head of Client Lines for Luxemboug, Ireland and the Channel Islands and Mounir Zahraoui, Head of Operational Risk Management.
Starting with you Shany, first of all, thanks for joining me today. So Shany, so you’re responsible for strategy and product development in some of the biggest fund domiciles in Europe. You’ve seen the growth of cross-border distribution in the last 20 years. What’s really changing now?
Fund distribution today: not how, but why
Shany Venon: Thank you Annie, As you know my role is looking after strategy, making sure that we bring to market the right solutions for institutional investors in the region. Luxembourg and Ireland in particular are the biggest fund domiciles in Europe and now represent 60% of European cross-border assets. These two financial hubs have been leading the way in fund structuring and innovation.
But what’s really driving the momentum today?
It’s quite simple: asset managers always want to distribute more. It’s about reaching new markets, attracting new investor segments and creating more tailored investment solutions. So in that send, Luxembourg and Ireland offer the infrastructure, the regulatory frameworks, and cross-border efficiency that makes large-scale distribution possible.
But here’s what’s really interesting is this: we used to have a conversation about fund structuring, fund plumbing, pure connectivity, and that conversation has now evolved into a much more strategic discussion. There is an increasing focus on diversifying into less traditional product types including alternatives, active ETFs, tokenized funds, blockchain-based distribution models, just to capture market flows.
The focus is now shifting from how funds are built to why they are built.
And clients want to understand how we can support them in this evolving ecosystem, where speed to market is key, from mediation to launching. These are the current discussions we have now with our clients and prospects. Clients would typically ask questions around data, how it is disseminated how it is integrated into their ecosystem with their front-office for reporting and analytics purposes.
Technology is also a core question, and they want to look at it more holistically as building blocks to ensure efficiency and optimization of the overall operating model. Finally, digital assets are raising quite interesting questions, rather more to understand the shift of responsibility in the value chain between them and us, for example around cash management. They want to understand where is the efficiency in implementing this type of technology.
Annie: Thanks Shany. So what challenges does this bring up? What are the areas that asset managers need to consider more closely, when designing or distributing these products?
New funds require new tools & infrastructure
Shany: So today, asset managers need more than just operational support from their custodian—they need a true partner who understands their product strategy, anticipates regulatory changes, and provides proactive solutions. But why?
According to a recent survey by Alpha[1], 50% of product functions say that ‘capacity to deliver products’ is a major pain point. And what’s more interesting is that only 29% have dedicated transformation budget to ‘support their desired people, process, technology and data changes across their organisation’. This is something we really see. Clients are coming to us needing that infrastructure, expertise and sometimes a different way of looking at their operating model to work out how they can deliver these types of new or emerging funds, and where their gaps are to deliver them.
So concretely, when asset managers build new types of product, whether it’s an ETF, hybrid fund, or tokenized vehicle, they face big challenges such as infrastructure. Legacy systems weren’t built for ETF flows or illiquid private assts. You need new tools, data models, and integrations. Reporting: investors and regulators expect transparency- daily for ETFs, and more complex disclosures for private or hybrid products, for example. Expertise: you need trading and capital markets know-how for ETFs. Structuring skills for hybrid. Tech talent, even, for tokenized assets.
And finally, regulation. Each product comes with its own compliance issues, especially across borders. So it’s not just about launching something new. It’s about re-thinking the entire value chain that we, as custodians, are part of. And in that context, we must, as well, evolve beyond execution. In today’s rapidly evolving landscape, a strong custodian doesn’t just protect assets—they enable growth, foster innovation, and drive efficiency, all while ensuring stability and security. So risk management is a key differentiator that asset managers, in this new complex landscape, seek in their business partner
Annie: Ok, that’s really interesting Shany. I think that brings us nicely onto you, Mounir, as our risk expert. So in this new, complex but innovative world, what are the key areas of risk that asset managers need to focus on? Would you agree that risk management is becoming more important?
Risk management: vital for fund managers
Mounir Zahraoui: Thank you Annie. As Regional Head of Operational Risk Management for several European countries, I wouldn’t say that the risk management is becoming more important, as it always was and is a critical component of our industry. This being said, it is true that today with the diversification of the product offering, we see a diversification of the risk profile our clients and banks are exposed to. This evolution of the risk profile is clearly part of the discussions we are having at the various country-level executive committees. While discussing these issues, we see three main drivers that are driving this change:
The first one: increased market complexity – with the diversification across asset classes, geographies and investment structures as pointed out by Shany, the risk landscape has become more complex.
Secondly, the pace of regulatory changes, which continues to accelerate globally, requires all stakeholders to adapt quickly while ensuring compliance and operational resilience – think about DORA, MICA, Data privacy etc.
Finally, emerging risks – even though they are not any more considered as new risks, still emerging are cyber threats, geopolitical instability, and climate-related financial risks, which are now key concerns. Evolving risks demand a proactive and forward looking approach to risk management.
A good recent example, I have contributed to is the risk assessment of the ECB’s experimentation programme on wholesale bank money for which BNP Paribas was acting as DLT – Distributed Ledger Technology – participant and DLT operator[2] . One of the key learnings from this trial is that the devil is in the details. It’s crucial to deeply understand the new solutions, products and processes which are directly and indirectly impacted to identify potential weaknesses – especially hidden manual tasks that can occur along the chain.
Annie: OK, so, clearly, asset managers are having to deal with the new types of risk brought about by changing market conditions, but also the risks brought by new technology, and the risks embedded in the actual design and operation of more complex funds. So, how can custodians/asset servicers support clients with these?
Key factors for risk management: regulation, expertise, controls
Mounir: That’s a great question Annie. And this is really where custodians and asset servicers provide value – helping clients turn risk into a strategic advantage. For this it is key to focus on several aspects, I believe.
The first one is augmented risk monitoring and controls. We’re seeing a big shift towards AI-driven risk detection, fraud prevention and operational resilience. Industry players are leveraging AI and automation to enhance monitoring- think fraud detection tools like Actimize. The hybrid funds you mentioned, Shany, is also a good example, as alternative and traditional investment have different infrastructure, different processing rules. Consequently,we need to develop sometimes more bespoke processes, which means that risks are more diverse. With that, we need to ensure that our risk management framework detect those risky processes, by reviewing in detail the set-up proposal and giving blocking or non-blocking conditions to secure our clients activities before go-live.
A second element would be regulatory expertise and support. Global custodian have the advantage of their local presence in multiple markets. This definitely helps clients staying ahead of regulatory changes and implement best practices in compliance and risk mitigation. Those players are also participating to regulators’ initiative to test and improve the framework and regulation. For example, we are part of many boards and working groups for industry associations and market infrastructures globally, and we were involved in the revisions of important fund regulations such as EMIR, AIFMD and MiFID II. This is really important in terms of improving practices and mitigating future risks that may arise when these regulations come into force or are updated.
Finally, as you said Shany, asset managers need a true partner who understands their product strategy. It makes it even more important that we have teams or people without just pure risk management experience, but bringing in people with investment experience, who understand investment processes. And in fact, it is sometimes easier to onboard someone who has previous industry experience in the funds or investment world, more so than purely risk management experience. This is where I think we, as the asset manager’s partner, need to adapt our people strategy and approach to human capital to adapt to these new processes, and new risks. At the same time, I think many clients are also having to adapt their teams and upskill their people in new product types, asset classes and so on so we are all going through the same thing together.
Annie: Shany and Mounir, thank you so much for your insights. I guess the takeaway is that clearly, asset managers are innovating and embracing new product types, new ways to reach investors but it’s important that they work closely with their partners to manage the new types of risks this presents.
Shany & Mounir: Thank you, Annie.
Annie: This has been a Beyond the Trade podcast, and do stay tuned for more episodes soon. Thank you.
[1] Alpha FMC, Asset Management Product Survey: Priorities for the future – Asset & Wealth Management – Alpha FMC
[2] BNP Paribas participated in Eurosystem trials of wholesale settlement DLT solution – BNP Paribas