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CXO: A global IT platform and organization

Enabling growth and staying competitive

Read this article and learn about:

  • Why globalization requires moving away from local setups and standardizing your systems
  • How having a single database ensures consistency throughout your system
  • Why processes must be aligned across the organization to reduce both risk and costs
  • How you ensure that your front office gets reliable data to be able to make the right investment decisions
  • The benefits of best practice sharing and talking about challenges with peers, vendors, innovative companies, and industry organizations

ABOUT THE INTERVIEWEE:

Claudio Peter Prutz 
Claudio-Peter Prutz, Head of IT and Organizational Development at MEAG
Prior to the founding of MEAG in 1999, Mr. Prutz developed its IT design and strategy. In addition to building up the company's infrastructure and defining its outsourcing concept, he has led numerous key projects for MEAG. Mr. Prutz represents MEAG in several Group-wide Munich Re committees and has more than 30 years' experience in the financial industry, including over 15 years as an IT executive.

About MEAG

MEAG stands for best practice asset management for Munich Re and ERGO. MEAG is present in Europe, Asia, and North America, and also offers its extensive know-how to institutional investors and private clients from outside the Group. MEAG currently manages assets to the value of around EUR 255bn.

The global investment management industry faces many challenges. In this recurrent CXO Corner relay column, we ask top executives to show us the way ahead, sharing their views and best practices for meeting the challenges.

 

Journal: Thank you for taking over the CXO Corner relay from Age Bakker, COO at Norges Bank Investment Management (NBIM). To begin, could you please give us a little update on your role and responsibilities at MEAG.

Claudio-Peter Prutz: I am the Head of IT and Organizational Development at MEAG, which is one of Europe's largest asset managers with more than EUR 250bn in assets under management. We deal in a wide range of asset classes, from bonds and equities to derivatives and alternative investments, including real estate. Our services also cover the entire asset-management value chain, including the special general ledgers of insurance companies. A major part of our business portfolio comes from our role as the asset manager for Munich Re, the world's leading reinsurer, for which we support many different entities globally.

Claudio Peter Prutz

Journal: MEAG’s business has become increasingly global over the years – why have you chosen to become a global company and what does that entail in terms of your business setup?

Claudio-Peter Prutz: Munich Re's core business has always been very international, and with our asset management activities, we aim to cover the payment liabilities from its core business with congruent assets. We pursue the same global approach with the assets we manage, and which Munich Re takes to its insurance business. So our international approach is not the result of an autonomous decision on our part, it stems from the business model and strategy of Munich Re.

However, we of course also want to exploit the opportunities that come from being a global player and grow our assets under management as much as possible. We cover most of the capital markets from our headquarters in Munich, but we also have a sizeable business in New York with special expertise on the North American market, and a smaller subsidiary in Hong Kong for the Asian markets.

Journal: What does it take from a systems and operational platform perspective to enable an asset manager to become a successful global player?

Claudio-Peter Prutz: Being a global player entails a number of things. It is not only about systems, it is also about processes. If you want to be a successful global company you need to insist on moving from a local to a global perspective. You must move away from local setups and standardize your systems and processes in order to reduce both risk and costs. Also, when you decide which market demands you need to meet, you have to be careful to distinguish between real market needs and individual requirements, in order to prioritize.

But it is not always as simple as that. An integrated system can help you standardize your order management, compliance, and settlement processes across borders, for instance, and enable you to meet special regulations, but there can also be special local needs that you have to accommodate outside your standardized setups and processes.

If you want to be a successful global company you need to insist on moving from a local to a global perspective. You must move away from local setups and standardize your systems and processes in order to reduce both risk and costs.Claudio-Peter Prutz, Head of IT and Organizational Development at MEAG

Journal: Coming back to some of the IT challenges of being a global player, can you tell us a little more about your views on best-practice data management if you decide on a global operating model?

Claudio-Peter Prutz: Data is key in our business. You could say that data is the new currency, so you have to care about it. When you get an app for free, for instance, it is actually not free, you pay for it with your data, which has real value. Professional data management is essential to running a global company. First, you have the data for all your holdings. Here, you can make use of an investment ledger or an IBOR embedded in your single-database system to record your positions at any time. This ensures that everybody is using and seeing the same data everywhere and at all times. Then there is all the static data, where you also benefit from having a single database as you only have to enter and subject the data to quality assurance once.

Overall, a single database ensures consistency throughout your system as you use the same data everywhere and can rely completely on its accuracy. This is vital because the front office needs reliable data to be able to make the right investment decisions, and your risk management instance has to ensure compliance of these decisions based on the same data.

Overall, a single database ensures consistency throughout your system as you use the same data everywhere and can rely completely on its accuracy. This is vital because the front office needs reliable data to be able to make the right investment decisionsClaudio-Peter Prutz, Head of IT and Organizational Development at MEAG

Journal: Moving on from data management to regulation, with Solvency II being a high priority in the insurance industry, can you elaborate a bit more on the challenges and how you recommend companies deal with them?

Claudio-Peter Prutz: It is extremely important to have sufficient market and credit-risk management in order to be able to handle the Solvency II requirements. Here it can be necessary to supplement your main system with a sub-system to ensure that you can deal with new requirements. However, you still need to make sure that you are only using one set of market data, which you then distribute throughout your entire operating model to ensure that you maintain one single source of truth.

Journal: Regulation is obviously a challenge for companies like MEAG, for instance with regard to Solvency II. What is your view on the discussions between industry players and legislators that we sometimes see have an impact on the final piece of legislation?

Claudio-Peter Prutz: It makes a lot of sense that industry players let the legislators know about their challenges. The timeline might be extremely ambitious, or there may be other challenging elements of a specific law. Also, you sometimes need to stand together to push back initiatives giving rise to new business models for providers of market information. We all need the information they provide, but we sometimes need to join forces to achieve tolerable conditions.

Claudio Peter Prutz

Journal: Coming back to other aspects of globalization - would you say that MEAG has a corporate culture?

Claudio-Peter Prutz: We have a best-practice culture shaped by first-class specialists and we are highly aware that we can only accomplish our asset management goals by working together with our clients and as a team. We are also an active asset manager that generates additional returns for its clients and mandates while accounting for risk, and we are always on the lookout for profitable and sustainable investment opportunities. For example, during the extended low-interest-rate phase, we have established new asset classes such as renewable energies and infrastructure.

MEAG also has a business-oriented culture – we want to be able to offer our clients the best possible options. As I mentioned in the beginning, we cover a very wide range of asset classes, as this is a demand from the market, including alternative investments. We need to achieve a certain return on investment – especially for our clients from the insurance and reinsurance industries. This is where alternative investments come into play, as there is no chance of achieving such high returns with traditional assets alone. Alternative investments include real estate, and as MEAG has always been active in this field , we have systems and processes in place to support such investments. Among the more modern alternative investments is infrastructure, for example, but this is not in fact new to our industry – even a hundred years ago, infrastructure accounted for up to a third of the assets we dealt with. And we have now also gone into renewable energy in order to achieve our investment goals.

Journal: Does including alternative investments outside real estate and infrastructure present any special challenges when it comes to regulations and IT support?

Claudio-Peter Prutz: The new illiquid asset classes of renewable energies and infrastructure bear some similarities to the also comparatively illiquid real estate class. So here we can exploit a lot of know-how that we have built up and honed over many years. But there are also some significant differences. For example, the approach to risk management is a different one. Another approach is also required in the due diligence work: a commercial property has to be assessed differently to a solar park.

In renewable energies we have the major advantage that we can make use of the insurance expertise available at Munich Re when evaluating things like the technical risks. This is just one example of the importance of working together as a team within the company group.

Journal: Being the Head of IT and Organizational Development at MEAG, a leading global organization managing a huge number of assets under management, takes that you are always up to date when it comes to what happens and will happen in the market, what new legislation is on the way, how you best tackle a multi-cultural organization, etc. How do you keep up?

Claudio-Peter Prutz: I have always read a lot and I listen to various consultants, but I would say that talking to my peers is also very important. Attending conferences and participating in different network groups are highly valuable ways of sharing experiences and best practices. Personally, I find it extremely beneficial to participate in various technology boards and to follow what is going on in new start-up companies. I think that sharing experiences and talking about challenges – with peers, vendors, technology experts, innovative companies and the various industry organizations – is the way we all become better at what we do and are able to meet the challenges of tomorrow.

Journal: Thanks very much for sharing your interesting insights with us. Is there someone in the global asset management industry whom you would like to pass on the CXO Corner interview relay?

Claudio-Peter Prutz: I would like to hand over to Regis Martin, Deputy CEO & CFO at Unigestion. With his considerable professional experience, I am sure he will have some interesting things to say about what he views as the biggest challenges and opportunities facing the industry going forward.

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