It seems that when it comes to trading and processing derivatives trades such as complex swaps, the buyside favors a manual approach.
A recent survey released by SimCorp, a provider of electronic investment management solutions, has revealed that 44% of buyside asset managers are relying on mostly or completely manual processes for managing complex swaps across the investment lifecycle. And more than 50% claim they still require some amount of manual intervention in a semi-automated process.
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In addition, more than half of asset managers are unable to obtain a consolidated view of their derivatives exposures alongside all other asset classes.
Swaps require ‘look-through,’ an interpretation tool that allows firms to see all of the underlying components of the asset itself. The ability to decompose each swap is critical in order to effectively monitor a firm’s overall strategy. Without one consolidated view of swaps positions in relation to all other asset classes, a firm cannot holistically track what it owns, its worth and the exposure across its entire book of business. That, combined with the lack of automation, can result in poor investment -making and be materially detrimental for investors.
The Simcorp survey polled 57 individuals from 32 different buy-side firms in North America.
“Despite long track records of derivatives usage within investment portfolios, patchworks of manual processes and desktop-based spreadsheet analytics still persist,” said Geoff Cole, director at Sapient Global Markets.
This inefficiency manifests itself as operational risk in the form of inconsistent or delayed views of exposure, longer month-end cycle times for NAV and performance reporting to clients, and delays in new product launches, he added.
The survey was conducted during a recent SimCorp online webinar, titled
