I recently had the pleasure of engaging with dozens of clients and consulting firms at SimCorp’s 2016 North American User Summit (NAUS). The attendees represented several of the largest, most complex asset managers and asset owners in North America, who, along with a number of leading consulting firms provided me with a great opportunity to learn what they thought about the conference theme – Driving Investment Performance with Operational Agility.
This was a terrific opportunity to actively listen. What were their priorities? What were their challenges? What success stories did they share? What questions were they asking?
Here are some key takeaways that should be of interest to fellow investment managers and asset owners:
The velocity factor
While not unique to the investment management industry, the goal posts used to measure “good” operational performance seem to move with a bit more velocity than other industries. Investment managers are being pushed and pulled by internal and external stakeholders to deliver more value with less resources, in less time and at a higher level of quality.
I would distill what I heard into three key themes:
- Transparency
- Simplification
- Control
Transparency for the front office related to valuation and analytics. Transparency for internal risk managers and compliance professionals. Transparency for potential institutional investors, who are conducting more in-depth operational assessments as part of their manager selection processes. It is no longer good enough to demonstrate solid investment performance in a particular strategy, but our clients also have to provide transparency and credible proof that their operational infrastructure is scalable and extensible.
To support the increasing demand for transparency our clients are striving to simplify their operating models. They are more likely to consider moving away from the best-of-bread approach that has created numerous data integration issues including data latency, duplicative manual entry points and system-to-system reconciliations. These issues manifest themselves on a daily basis when portfolio managers and traders spend their valuable time questioning start of day position and cash figures instead of making investment decisions.
Investment management firms are looking for strategic partners to help them simplify their operating environment to increase control and transparency
Investment managers need more control over how and when they implement changes to their investment strategies. They can’t afford to be held hostage by an operating environment, so complex that they need to coordinate with four different software vendors to determine if they can start trading a new instrument. A best-of-bread application architecture is only as good as the weakest link. For example, with multiple systems involved in trading, accounting, analytics and reporting if any one of those systems doesn’t properly support a new instrument type our clients must rely on labor intensive, risky, manual workarounds.
Investment management firms are looking for strategic partners to help them simplify their operating environment to increase control and transparency.
Operational agility is attainable
One of our clients, a large institutional investment manager, shared an impressive, inspirational success story. Over the last few years they initiated a multi-phased operations and technology transformation program. They greatly simplified their operating model by reducing the number of systems and service providers. While there is still more work to do they have made significant progress and realized real, tangible benefits. They improved STP rates, established a more efficient reconciliation process and provide more timely and accurate information to their investment professionals – all while significantly reducing their annual operating costs.
By providing credible proof that simplification can increase control and transparency, this presenter (client) made a compelling case for operational agility and how operations and technology transformation program can be inspirational.
Do you have similar stories? I’d love to hear from you.
