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New North American Buy-Side Research Reveals Trend Towards Multi-Asset Investment Platforms
Traders Magazine Online News, January 29, 2019
SimCorp a leading provider of investment management solutions and services to the global financial services industry, today announces the findings of its third annual 2019 North American InvestOps Report: ‘Empowering Multi-Asset Front-to-Back Investment Operations’. Commissioned by SimCorp and independently conducted by WBR InvestOps, the report finds 79% of North American Buy-side Heads of Operations state their top strategic priority for 2019, as decreasing operating cost and improving operating leverage. The findings come at a time of heightened market complexity, with the rapid proliferation of alternatives and illiquid assets, together with ever-tightening margin pressures, placing a greater spotlight on costs.
As pressure from passive management continues to mount, the report’s principal findings indicate a significant turn in the tide. For 2019, the majority of buy-side operations strategies are moving away from overstayed legacy technology and fragmented best of breed systems, towards consolidation and integrated multi-asset platforms. As many as 80% of North American Buy-Side Heads of Operations want to see alternatives consolidated onto a single platform, for front-to-back office processing, in order to make critical improvements to data and enhance operational support of alternative, such as private debt, real estate and infrastructure.The changing opinion and findings convey an urgent need for firms to gain cost efficiencies and comes at a time when many are forced to introduce performance linked fees.
Carried out by WBR InvestOps, the report captures the thoughts of 100 North American Heads of Operations, across sectors including asset management (40%), pensions (27%) and insurance (29%). Interestingly, 65% of North American Heads of Operations aim to pursue system consolidation through a front-to-back office solution offered as a platform or a service, rather than a similar front to back offering from a custodian (29%). Despite the recent industry M&A, this can be considered as due caution shown by buy-side operations. Particularly regarding the degree of integration these vendors or outsourcers can achieve, when piecing together disparate and acquired technologies, to create a true front to back offering.
Further highlights of the report’s findings include:
The Challenge to Support Alternative Investments
- Following Alternatives (80%), North American Heads of Operations, stated derivatives (74%) and debt securities (64%) as the next asset classes they want to see consolidated onto a single platform for front to back processing
Front Office Concerns
- North American Buy-Side Heads of Operations state top front offices challenges:
#1 The provision of timely and accurate start-of-day positions (47%)
#2 Implementing new asset classes in a timely manner, to accelerate time to market for new products (40%)
- 58% of North American Heads of Operations state, bringing multi-asset strategies onto a single *PMS/OMS and EMS platform will be a key strategy for addressing their top front office challenge
Achieving Hard Dollar Savings
- When asked about the primary means for achieving cost reduction and improved operating leverage:
80% of North American Buy-Side Heads of Operations cited increasing accessibility and accuracy of data to support the front, middle and back office as their approach. While 69% stated consolidating systems and reducing system interfaces.
Contributing in the report, Eric Bolisay, VP, Head of Derivatives Strategic Operations T. Rowe Price,comments: “From a technology perspective, consolidating disparate systems brings cost efficiencies in reducing the overhead required to support different products, both in terms of infrastructure as well as technology resources. As a result of consolidation, there are also often opportunities to streamline processes that once required complex integration across multiple systems.”
Jamie Corrigan, Managing Director and Executive Vice President, SimCorp North America,comments:“Our view has always been that the ability to support multi-asset investing can be simplified and made far more cost-efficient, with a consolidated technology strategy, embracing all asset classes on a single platform. This is evident in our one system approach since inception. It is encouraging to see that in both this report and in previous years, there is a decided and growing trend of operations leaders recognising consolidation can achieve strategic priorities.”
“In the past, the biggest hurdles to consolidation were the big bang approaches used, and the concern of compromise over rich functionality. With agile delivery significantly mitigating transformational risk and technology innovation that provides advanced analytics, real time data and comprehensive functionality, we feel those obstacles are long gone. The question operations leaders should ask themselves is not if and when to consolidate but how.”
To learn more about these findings and to access the full research report, please click here
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