SimCorp Leaders

Improving your multi-asset capabilities

Multi-asset strategies in Asia are showing continued momentum with no signs of slowing down.

Prompted by today’s low yield environment, there is a deepening need for more diversified portfolios to enhance returns. As such, the demand for product differentiation and the resulting creativity brought to the table by portfolio managers are two factors driving the emergence of increasingly sophisticated offerings in the competitive multi-asset fund space.

There’s “growing interest in Asia” in partnerships with multi-asset managers that can offer extensive research capabilitiesThomas Poullaouec, a Hong Kong-based managing director, State Street Global Advisors, Pension&Investments

Effects of the multi-asset approach are spreading throughout the entire industry and industry players need to begin thinking about including a multi-asset focus in their roles, strategies, and business models.

However, building and driving multi-asset strategies is complex. Teams have to manage data across different asset classes with vastly different characteristics – all while actively looking for correlations between these assets to optimize total portfolio performance and risk. This complexity puts a premium on having skilled and experienced multi-asset teams, supported by the right information system that provides accurate and timely metrics for overall exposure.

Building out the expertise of multi-asset teams has been a top priority among fund managers regionally in recent years, but ensuring the right infrastructure is in place to support increasingly intricate strategies remains challenging.

Building out of multi-asset teams is one of the main hiring trends among fund managers in Asia now Jeremy Harris, Wellesley Partners. AsianInvestor

Breaking down silos

Most top-tier fund managers in Asia still rely on multiple siloed systems. This means that additional interfaces have to be attached to existing infrastructure, with extensive manual reconciliations needed between various parties to effectively implement multi-asset strategies. A survey by TABB Group “Breaking Down Buy Side Barriers: Achieving Alpha through Agility” found that more than half of senior front and middle office staff -highly skilled investment professionals - were spending hours manually identifying, questioning, validating, reconciling and manipulating their position, cash and analytics data. Operational inefficiencies like these add up over time, resulting in entire teams falling behind the curve.

This represents a timely opportunity for larger, more sophisticated asset managers to differentiate themselves from the competition. A 10-year research study by Forward look, titled,  “Operational efficiency and portfolio performance – how improved operating quality helps enable portfolio returns” featured in SimCorp’s Journal of Applied IT in Investment Management, has drawn a direct link between operational effectiveness and portfolio performance.

Addressing the technology lag can support firms in three critical ways:

  1. IT simplification and the resulting cost efficiency will help address the increasing pressure on fees while minimizing operational shortfalls that arise from a suboptimal investment platform.
  2. Increased data quality and control will help improve decision-making to manage risk better and meet regulations.
  3. Increased operational agility and scalability will become a prerequisite for capturing investment opportunities and adapting to the continually changing and challenging global markets.
The rapid transformation undertaken in Asia over the past decades has opened up many attractive investment channels and significantly expanded the risk opportunity set. We think the environment for multi-asset investing in the region is ripeCurtis Yuen, MAPS Capital Management. Funds global ASIA

Time to rethink operating systems

As investors continue to face market uncertainty while struggling to earn yield in a low interest rate environment, multi-asset strategies that aim to capture opportunities are here to stay. Furthermore, investors are demanding access to broader and more complex products. While these are challenging times for asset managers, opportunities are abundant for firms who can implement successful multi-asset strategies satisfying evolving client demands. Beyond assembling a highly-skilled team, it is imperative to identify silos in existing systems and address any technology lag incompatible with existing objectives. This will ultimately determine if firms can continue to stay ahead of the curve.