Read the interview and learn about:
- How the cloud can solve for a complex infrastructure
- Why data transparency starts internally
- Limited Partners and alternative investments
- Mastering regulatory compliance
- Making the most of the data deluge
- Tackling increasing client reporting demands
Marc Schröter, Senior Vice President, Head of Product Management, SimCorp
Recent years have shown that global investment managers need to deal with increasing levels of complexity. 2018 will be no different. This article looks at six key issues that will require special attention from investment managers to tackle challenges and seize opportunities.
When looking at the year ahead, six drivers of complexity put special demands on investment managers’ operating models:
- Increasing tech-complexity
- Growing demands for transparency
- Alternative investments
- Increasing regulations
- Data growth
- Increasing client reporting demands
1: Cloud for a complex world
The ability to focus on your core business gets increasingly important as the challenges of a complex world keep growing. Technology is one of the drivers of complexity and typically not part of investment managers’ core business. As the tech-complexity of most operating models has increased over the years as a result of short-term solutions, we now see an increasing demand for tech-simplification.
Cloud offers the opportunity to shift some of the complexity to somebody else – the cloud provider – in other words outsource the complexity. This can be done as traditional “lift and shift” outsourcing to a private cloud or as a migration to a public cloud. The solutions are different in the way that a private cloud generally refers to a fixed pool of dedicated hardware which requires manual processes, whereas a public cloud offers a shared pool of hardware operated at an extreme scale and where everything is automated and paid for by consumption.
In a 2017 report,1 cloud solutions were reported as a preference among 62% of the investment management firms surveyed. Only a year ago, these numbers would have been more conservative. In 2018, we expect to see early adopters deliver the first successful cloud deployments of previously on-premise-only systems.
So, what can you do if you have not begun your own cloud strategy work? I recommend that you try to find out how public cloud could support your business as this looks to be a trend that is bound will pick up even more pace. Discuss options with your vendor and share experiences with your peers about how cloud can help reduce complexity as well as bring a higher level of cost-effective scalability. Consider how cloud may allow you to outsource some of your firm’s non-core activities and help ease system integration.
2: Data transparency starts from within
We hear the word ‘transparency’ regularly. Investors demand transparency over their investments and fees. Regulations like Solvency II and MiFID II focus on increasing transparency in the market. What is often overlooked though, is the equal importance of creating data transparency within an investment management firm.
With the amount of regulatory changes to come in the next 12 months, from the inclusion of FX into the BCBS-IOSCO Margin Variation Rules to the introduction of the landmark privacy law, GDPR, better data transparency in firms’ operations seems the only way forward. What’s more, many other areas would benefit from improved data transparency.
One way to achieve this operational data transparency is to operate on a ‘golden master’ or single source of data provided by an Investment Book of Record (IBOR) across an integrated solution. This is no new phenomena, but growing in adoption, and with good reason. Research from the consultancy Forward Look, Inc. suggests improved timeliness and quality of data delivered by integrated solutions can translate to anywhere between 51-242 basis points (bps) of inherent alpha.
In 2018, the transparency once perceived to be a luxury will become a necessity. Investment managers will begin to see the need for a holistic data approach, not just to sustain, but to achieve the competitive edge required to grow.