Embracing one investment truth for both public and private markets
Central to many of the pain points firms experience today is the need to consolidate systems, to enable one core multi-asset platform that can cover investment and data management across public and private markets. Avoiding pitfalls by moving away from fragmented best-of-breed systems is essential to achieving one unified view of the truth across the organization.
If we are to secure a future with informed decision-making, then it is one version of the truth, that will drive the best investment outcomes and navigate volatile markets, delivering firms with full look-through and real-time transparency of what they own and what it’s worth across all asset classes and investment strategies. It’s an operating model that has proven its ability to solve complex, costly and time-consuming operational challenges, better supporting a firm’s goals.
And it doesn’t just stop here. ESG and sustainable investments, can also be integrated within the core platform, across all asset classes and throughout the investment chain, from; ESG assessments, to ratings, compliance and portfolio construction. Embedding this growing investment strategy into core operations and even within client facing functions like client communications, rather than approaching it as a satellite strategy, will not only improve transparency and scalability but also become a competitive differentiator for firms.
Shifting from endless data management to seamless Data as a Service
If firms are to value the time and talent of the people within their organization, then data management is one item that must firmly be on the 2021 agenda. The bottom line is firms simply cannot afford to waste talent on endlessly repetitive data reconciliation tasks. The proliferation of financial data is only going to increase and managing new asset classes and new regulations is only going to get more complex. Having fast access to clean and complete data is a clear strategic advantage, as is having the agility to respond to change and seize new opportunities. Firms need to focus on transitioning talent away from mundane manual data processing tasks and on to more high impact, alpha-generating activities, i.e. work that not only inspires and motivates employees, but is truly market differentiating as well.
While traditional data management models, such as Enterprise Data Management (EDM) have gone some way to addressing the problem, when we talk to the market it appears these more traditional approaches are now too rigid, slow to accommodate change, not scalable enough, and from an expertise perspective, overly reactive. What is missing from these approaches is the agility firms need to act, and capitalize on change. It became very clear to us that a new, more holistic approach was needed.
When we introduced SimCorp Datacare, we brought together state-of-the-art technology with a managed service, providing a highly automated, multi-asset, front-to-back solution for market and reference data management. The value add is the combination of technology and a holistic advisory service; a team of experts dedicated to assisting firms to get a true handle on the volumes of data they hold and what it can do for their business, while also staying on top of industry, regulatory and market data changes that may impact their operations. We call this Data as a Service, an approach that not only takes away the data maintenance headaches that firms have today, but changes the game entirely; creating value that optimizes data management as a tool for the firm, rather than a task it has to manage.
Empowering the front office with an accurate, real time overview of positions and exposure
When firms look at empowering their front office, the first question they need to ask is whether they are able to responsibly manage their client portfolios with an accurate, real time overview of what’s in it, across asset classes. Achieving this means simplifying the operational landscape and breaking down the siloes where data becomes stagnant and outdated. A core platform, powered by one investment truth, can galvanize front office teams with rich functionality, and access to up-to-the-minute data for investment decision-making and analytics, as well as enhanced risk management.
While for many firms, consolidation may not start in the front office, it holds many benefits for trading desks and portfolio managers, including more accurate positions and cash data for investment decision-making, and faster onboarding of even the most sophisticated asset classes e.g. complex OTC derivatives and illiquid investments. An platform that is also open to external innovation through a broad ecosystem of partnerships, such as those SimCorp has with TradingScreen, OTCX and BidFX to name a few, can also deliver more value into the investment chain, providing a competitive edge to firms, and adding integrity to the firms’ investment data.
Digitalizing client communications to boost client experience
If we’ve seen one area of investment operations that has been particularly strained in the last year, it’s in the delivery of client communications and reporting. With heightened conditions continuing to shock investor confidence, many asset managers have struggled to meet the demand for real-time reporting, as well as more frequent and granular communication from their clients, particularly while working in a remote environment. We know remote working isn’t changing anytime soon, and even when a form of normalcy returns, firms will no longer be able to shy away from the ‘anytime anywhere’ access to data their clients want.
Inversely, while investor demand has grown, many firms are running on leaner resources using under-invested, legacy technology that cannot scale and automate communications and reporting, and requires intense manual intervention. Operating analogue in a digital world is just not sustainable, when your clients are using on-demand technology. Firms have to bring their communications and reporting function back up to speed and set the tone for a more compelling client experience.
Digitalizing the client communications function and pairing it with cloud-enabled technology, as SimCorp has chosen to do with the SimCorp Coric digital portal, not only becomes a key asset in overcoming the scalability challenges raised by increased client engagement, but effectively enhances the client experience with proactive dialogue and engagement, creating a distinct advantage for firms. It instils trust and confidence that not only retains the relationship, but also extends it.
Making the most out of the cloud
With the industry in agreement on cloud as the delivery model of the future, and with security concerns now fully addressed by robust public cloud providers such as Microsoft Azure, moving operations onto a cloud platform clearly provides the most agile operations. Over 2020, we’ve seen the benefits of this model realized, as it became the foundation for successfully managing remote working and operations.
Cloud isn’t just crucial to the operations of firms, but also for the service providers that they rely on. SimCorp’s continued investment in its cloud transformation meant last year we were able to rely on cloud technology to power the remote working capabilities of employees across global offices, without disruption to our service levels. It has also been fundamental in delivering client implementations, using a fully remote delivery model during the COVID-19 lockdown. Ultimately, it ensured we brought existing and new clients into production on time, supporting them with business continuity in already challenging conditions.
Beyond this, and in the context of client experience, we feel the cloud can create a real opportunity for innovation, forming cloud-native solutions and cloud-enabled managed services. This will see service providers go beyond their traditional remit, enabling them to take over the time-consuming maintenance of the systems, processes, and data owned by the client. Driven by greater accountability for the tangible business outcomes of clients, these managed services, will once again put firms on the right track, moving away from operations and towards their core business goals, e.g. alpha generation.
Leveraging external innovation through an open ecosystem
The market for fintechs, start-ups and even enterprise-led innovation is growing at a rapid pace, and it’s not always easy to keep track of what services and solutions exist. When setting up innovation programs, it is important is that firms ensure they integrate innovation within the core investment management platform, rather than create new silos. This approach maximises the additional value and maintains one investment truth, throughout the organization.
This is fundamentally where we see the next challenge for the buy side, moving from the consolidation of front-to-back platforms, to accessing open ecosystems. Service providers play a vital role here. Having delivered a native front-to-back platform far ahead of the curve, the creation of an open ecosystem where partnerships with revolutionary firms like Intellibonds and Colmore, within the broader fintech space, are combined with SimCorp’s own proprietary development, forms a natural extension and we believe will can also optimize competitiveness and margins in the buy side.
This will be especially critical in 2021, where many internal innovation projects may be on hold, enabling firms to access a combination of technologies, solutions and services delivered by their core investment management platform. This ability to leverage external innovation, scaled and integrated through an existing and trusted service provider, and without having to do the research and due diligence, should prove an attractive proposition for many buy-side firms.
Creating the right foundation for today and beyond
If we look for the common thread within all these operational priorities, we see that they all relate back to and integrate within a firm’s core investment management platform, and that’s no happy coincidence. By fulfilling elements such as data management, external innovation, Cloud technology and the front office, within a core operating environment, we begin to create something far greater and more meaningful than the sum of these parts.
As we approach our 50th year in business, it is our firm belief that optimizing operational resilience, through these priorities and across a firms’ investment chain, will deliver the foundation needed to compete in an increasingly complex landscape and successfully drive business outcomes. But more than that, it will expand the long-term positive change the buy side can create, not just in responsibly delivering financial prosperity for its stakeholders, but also in their socio-economic and environmental contribution to the global community at large.