SimCorp is pleased to announce that it has been selected by AP3 and AP4 as their new provider of a portfolio management system.
Following a public procurement process and a thorough analysis of 13 applications, the two Swedish national pension funds have signed a front-to-back SaaS service agreement with SimCorp, covering the entire investment management value chain.
AP3 and AP4, collectively managing approximately EUR 100 billion in assets under management, shared the goal of achieving a modern and dynamic system architecture with more automated processes and a reduced number of separate systems, some of which had a complex, and in some cases, low levels of direct integration.
“To be a world-class asset manager, we must ensure efficient processes across the entire organization, qualitative and timely data for analysis and the ability to adjust to changing conditions internally or externally,” says Eva Boric, CFO and CRO at AP3.
As part of the aim to streamline the technical infrastructure, the two funds jointly performed a feasibility study during 2019 to explore what the market can offer in terms of a front-to-back buy- side asset management solutions that can cover requirements and needs for several business areas.
“Our previous more complex infrastructure was not fit for future purpose. A handful of best-of-breed systems will be replaced which will reduce the complexity in system management and increase our operational efficiency,” Boric says.
AP3 and AP4’s requirements for their new portfolio management system
AP3 and AP4 had identified seven key areas that required consideration in their procurement of a new integrated portfolio management system to meet the needs of their investment operations.
- Back Office and Accounting for financial Assets covering the Funds’ needs for post- trade investment life cycle events and accounting needs for the financial assets.
- Front Office covering the Funds’ needs for pre-trade and trade processes.
- Middle Office Data and Analysis covering the Funds’ needs for middle office data management, analysis, and portfolio valuation.
- Investment compliance covering the Funds’ needs for limit configuration, calculation, and utilization for control, analysis, and reporting.
- Alternative investment covering the Funds’ needs of incorporation of alternative investments in an integrated solution.
- Performance and attribution covering the Funds’ needs for insight into performance analytics with calculation, attribution, and contribution for a multi-asset and multi-level investment process that can measure impact of currency hedges and overlay.
- Risk covering the Funds’ needs of ex-ante market risk analytics for risk control, analysis, and reporting, and if possible, liquidity risk calculation, analysis, and reporting.
Complete portfolio overview
The portfolio management system solution is based on a data-centric architecture, which is foundational to long-term success in uncertain markets.
According to Nicklas Wikström, Head of Risk & Performance at AP4, it was important for the portfolio management system to contain an integrated Investment Book of Record (IBOR)—the foundational piece that provides risks and exposures across the entire value chain for the best investment decisions – and an end of day holding in the Accounting Book of Record (ABOR).
“Our ambition is to replace a number of old existing systems with a comprehensive solution to achieve a flexible and appropriate system support where we can more quickly and efficiently meet changing needs from both the business and the outside world,” says Nicklas Wikström, Head of Risk & Performance at AP4.
AP3 and AP4 have 32 and 15 percent of their portfolios invested into unlisted assets, respectively. It was therefore also important with good functionality for alternative investments, performance, and risk with the possibility of obtaining an overall picture of the total portfolio in one and the same system.
“Delivering our investment management platform through our SaaS platform empowers AP3 and AP4 to streamline their operations by using the latest advancements in automated processes, thereby enhancing their operational efficiency”
Managing Director EMEA at SimCorp
SimCorp and its long-standing partner Axioma will jointly provide the holistic total portfolio risk overview across public and private assets to ensure the total portfolio view.
“Our new portfolio management system solution is expected to lead to shorter time to even better informed analyses and investment decisions. Through reduced complexity in system infrastructure and management, the operational risks in AP4’s central business processes are also reduced,” says Wikström.
Given the uncertain economic situation, asset owners like the AP Funds continuously work on increasing their portfolio’s diversification and robustness. During the spring, for example, AP4 carried out several measures to strengthen its portfolio’s inflation protection through an increased allocation to assets that can offer a high degree of real cash flows, and preferably also reasonably stable ones.
With the same goal in mind, AP4 has also slightly increased the portfolio’s allocation to the Defensive Equities asset class, which has been designed specifically for this purpose.
Delivered via a SaaS model
A number of key objectives were set for the procurement process. These include a standardized, flexible, and scalable system solution that is cloud-based and where IT operations and system maintenance are managed by the vendor.
This delivery model where the vendor delivers the financial technology Software as a Service (SaaS) allows investment managers to truly focus on their core business rather than deal with operational IT issues such as installing, configuring, upgrading, and running software.
“We take great pride in our new long-term partnership with AP3 and AP4. The strength of the SimCorp platform combined with Axioma’s risk management solutions will allow AP3 and AP4 to future-proof their investment management operations. In addition, our front office and alternative investments solutions will provide AP3 and AP4's portfolio managers with a consolidated overview across all asset classes and enable them to execute their investment decisions quickly and confidently,” says Ralf Schmücker, Managing Director EMEA at SimCorp.
“Delivering our investment management platform through our SaaS platform empowers AP3 and AP4 to streamline their operations by using the latest advancements in automated processes, thereby enhancing their operational efficiency,” says Schmücker.
About AP3 and AP4
AP3 and AP4 are two of five buffer funds in the Swedish public pension system with a mission to manage part of the pension system’s buffer capital.
We manage the fund capital in an exemplary manner through responsible investments and ownership. In this way, we contribute to financial security for today's and tomorrow's Swedish pensioners.
SimCorp offers industry-leading, integrated investment management solutions.
Our platform and ecosystem, comprising partners, services, and third-party connectivity empowers us to provide 40% of the world’s top 100 financial companies with the efficiency and flexibility needed to succeed.
With over 25 offices around the world, and more than 2,450 employees, we are a truly global, collaborative team that connects every continent and industry seamlessly.
For more information, see www.simcorp.com
SimCorp Media Contact:Søren Rathlou Top, Global PR & Communications Manager
+ 45 31 15 87 06