Read this article and learn about
- Why firms are now looking at their front office system strategy
- The business drivers for change
- The operational benefits of change
- The types of solutions that are being considered and why
Clare Vincent-Silk, Head of Advisory at Pentagon Consulting
Changes in investment strategy, the pursuit of growth and expansion into new markets, the need for data consistency, and a growing regulatory scrutiny are leading asset managers to re-evaluate their use of front office systems. This article describes these drivers and the benefits change can bring.
Historically, asset managers have adopted a best-of-breed approach to their front office platforms, whereby specific systems are deployed for specific asset classes, geographies, or markets. Whereas this may have been an effective strategy in the past when there were a limited number of specialist systems able to meet these very individual demands, the limitations of the best-of-breed approach in a complex world are becoming increasingly clear.
The move towards simplification and consolidation
Market developments in recent years have shown up the limitations of the best-of-breed approach and emphasized the need for a different strategy.
- Firstly, there is a continual focus on cost efficiency and firms are no longer able to simply buy a new system on the whim of a portfolio manager that decides he wants to invest in a new instrument.
- Secondly, years of buying separate systems have left firms with a sprawl of systems that are expensive to maintain, difficult to integrate, and nigh on impossible to adapt without adding further to the sprawl.
- Thirdly, there are more integrated systems available now to firms enabling them to bridge any gaps in functionality.
Consequently, a growing number of asset managers are looking to adopt a new approach – one that rationalizes the number of systems they use, simplifies their operating platforms, and reduces their total cost of ownership.
At the same time, though, the low interest rate environment and intense competition have pushed portfolio managers to adopt more complex strategies and they subsequently need systems with enough flexibility and functionality to match their ambitions.