InvestOps USA today launches its new report ‘Operations as a Competitive Advantage for the Buy Side’, in which it has found a staggering 80% of North American buy-side firms looking to system consolidation, as their top strategy for reducing operational costs. The same sentiment features in the top strategic priorities, where system consolidation is named the top business priority for 2018, by 75% of firms. The findings signal a rising tide of operational and cultural change confronting the current status quo in investment operations, driven by increasing pressures for cost reduction and support for overall profitability.
The newly released research report, conducted by WBR Insights, the research division of Worldwide Business Research, and commissioned by SimCorp, a leading provider of investment management solutions and services to the global financial services industry, surveyed 100 North American buy-side firms in Q4 2017. It captures exclusive industry insights from the Directors/Heads of Investment Operations, Chief Operating Officers (COOs) and Chief Technical Officers (CTOs) across the buy side, including Asset Management firms, Institutional Investors and Insurance Companies.
The report focuses on the challenges faced by operations in improving operating costs and overall profitability, amid margin pressures. A significant 79% of participants agreed investment operations plays a key role in achieving this goal. Interestingly, while 73% of those surveyed were confident that technological disruption is coming their way in 2018, 50% felt their current technological capabilities were just functional, with a further 19% stating their capabilities, as lagging the curve. The findings show a significant gap in the operational role and the subsequent delivery, but also an opportunity to drive change and support the future of buy-side firms.
One of the key areas where operations can play a vital role is supporting a firm’s competitiveness, by reinforcing its front office. Here, the report found that before turning attentions to profitability, or to disruptive and value-add strategies, operations must first overcome the cultural norm that has manifested in the industry. When asked how the operations team were viewed by key stakeholders in the front office, 30% of participants stated they were regarded as ‘roadblocks’ to supporting new investment mandates. While only 17% of Heads of Operations felt they were seen as ‘true innovators’ by their front office stakeholders.
When put together with the below data challenges that plague the operations team on a daily basis, it is clear that a step change is due, where operations take the lead on strategic decisions that not only positively impact the front office but also support firm-wide goals in the process.
The following were stated as the top three operational challenges in the front office:
- An overwhelming 89% of operations stated the provision of timely and accurate start of day positions and cash, as their top challenge in supporting front office staff
- 80% cited difficulties in the creation of options to trade new asset classes and strategies in a timely manner
- 67% struggle with accurately measuring firm-wide limits and counterparty exposures
Marc Mallett, VP of Product Management, SimCorp North America comments: “The survey results are unequivocal. The fact that only 17% of Heads of Ops perceive themselves to be viewed as true innovators by their stakeholders, signals a time for change. Vital to this change, is the opportunity for buy-side operations to move beyond traditional roles and support operational efficiency, by consolidating data sources and increasing automation. This will in turn drive growth and profitability. Ultimately, empowering the front office with a real-time IBOR and a single source of actionable data across all asset classes, will deliver the competitive advantage required to thrive in today’s markets.”
Lauren Harrison, Head of InvestOps Research, WBR Insights said: “The report clearly shows the transformation that is needed if investment operations teams are to continue to meet their role and expectations, in a fee pressured environment. It is therefore no surprise that when talking to the 100 North American buy-side participants for this report, that system consolidation is at the forefront of their 2018 strategies. With data being key to much of the present-day operational struggle, all the findings point to consolidation to deliver firms the strategic advantage they seek.”
Additional key findings include:
- Regulation: 75% of the North American buy side stated implementing new data management processes as their top challenge, when complying with new regulations
- Investment Strategy: 77% of participants are employing active management either primarily, or as part of a hybrid
- Asset Class Support: Alternatives (34%) and Private Debt (28%) are the most costly and challenging asset classes to administrate
To learn more about these findings and to access the full research report, please visit: https://investops.wbresearch.com/investops-2018-report-simcorp-mc
SimCorp provides integrated, best-in-class investment management solutions to the world’s leading asset managers, fund managers, asset servicers, pension and insurance funds, wealth managers and sovereign wealth funds. Whether deployed on premise or as an ASP solution, its core system, SimCorp Dimension, supports the entire investment value chain and range of instruments, all based on a market-leading IBOR. SimCorp invests more than 20% of its annual revenue in R&D, helping clients develop their business and stay ahead of ever-changing industry demands. Listed on NASDAQ Copenhagen, SimCorp is a global company, regionally covering all of Europe, North America, and Asia Pacific.
For more information, please visit www.simcorp.com.
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