By Michael Pusateri, CEO & Founder, Siepe
Efficiency is the genesis of all operational success. Not only does it help reduce costs and increase profits, but it also improves time to market and allows firms to adapt to changing market conditions. However, it’s challenging to unlock the optimal pathway to efficient workflows. On top of that, the global pandemic has made it increasingly challenging for asset managers to implement processes into business models without seeking help from third-party technology providers.
Siepe conducted a survey to identify what services asset managers have considered outsourcing to better understand the pressures these firms have been experiencing.
Which of the following services will you consider outsourcing to reduce operational pressures within the next 24 months?
- IT Infrastructure – 55%
- Reconciliation – 36%
- Collateral Management – 9%
- Portfolio Accounting – 0%
Unsurprisingly, IT Infrastructure accumulated the highest vote. This makes perfect sense given the new and changing working parameters. As we have discussed in a previous blog, many asset managers are adopting a more hybrid workplace to mitigate future operational risks posed by potentially infectious employees and stringent government measures aimed to tackle the spread of COVID-19.
In that piece, we explained why onboarding a managed services provider with IT infrastructure is necessary to:
- Access data and workflows on- and off-premise
- Maintain security on- and off-premise
- Adhere to regulatory and compliance standards
Similarly, going hand-in-hand with the new working environment – reconciliation received a high number of votes. This is because without implementing the correct technology and processes in a hybrid workplace, disconnected asset managers would struggle to confidently track the full position lifecycles and reduce end-of-day processing – causing fund performance to suffer.
Instead, by leveraging a managed services provider they will be able to continually access the tools they need – such as automated positions, trades, and cash reconciliations that use persistent mappings and integrated resolution workflows – regardless of location.
Collateral management received a small percentage of the vote, largely due to regulatory reform. Regulation is playing an increasing role among asset managers as they look to optimize collateral to reduce costs and remain within regulatory parameters – especially during times of heightened market volatility. Additionally, fee compression is forcing managers to find ways to reduce expenses. Outsourcing collateral management can provide a lower-cost alternative to building and maintaining the infrastructure and resources internally.
Interestingly, portfolio accounting was overlooked. However, with asset managers constantly faced with the growing challenges of diverse fund structures which create disparate data sources, it’s essential that they have the tools in place to delve deeper into analytics enabling them to make more informed, strategic portfolio management decisions.
There are a few pivotal reasons why this should be outsourced to a managed services provider:
- Data Aggregation – Growing assets under management tends to lead to a scenario where multiple fund administrators are utilized. Therefore asset managers need the ability to aggregate position and P&L data from disparate sources to provide a consolidated view of all investments.
- Dynamic Reporting – With a managed services provider, asset managers can seamlessly adjust to evolving business needs with intuitive, self-service, and customizable reporting views and analytics.
- Customizable Interactive Dashboards – By visualizing portfolio exposure and performance measures with varying dimensions of granularity and analytics, asset managers can effortlessly adjust investment decisions depending on what’s best for their portfolio.
- Compliance – Despite changes to global regulations, with a managed services provider, asset managers will be able to track full position lifecycles with integrated asset details for approval, documentation and investigation by a valuation group – without the fear of having to face fines for implementing inadequate measures.