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New InvestOps Research Reveals 2018 Priorities for North American Buy Side Firms
Traders Magazine Online News, January 29, 2018
InvestOps USA launched 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
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