Any investment manager can look good when markets are calm. What happens though when conditions get choppy? And how can a robust, agile technology ecosystem help navigate the challenges?
This was the topic of SS&C Advent solutions consultant Daniel Leader’s talk at the recent Fund Operations Conference in Frankfurt hosted by the BVI, Germany’s investment funds association. The conference focused on trends in the securities and funds industry, with sessions covering everything from trading and reporting to digital assets, cybersecurity and ESG data. But one issue is dominating industry discussions: the darkening economic and market environment.
We’re now wrestling with multi-pronged risks from a global pandemic, resurgent geopolitical uncertainty and a cost of living crisis. Each brings profound threats. But ones that technology is well-placed to mitigate.
The Changing Workplace
The rolling pandemic waves continue to put huge strain on systems—both the IT infrastructure itself and the demand for new functionality, to ensure people can carry on performing their daily tasks, interact with clients and deliver seamless services, often at higher frequency and with different parameters.
Key person risk has also come to the fore. Staff absences and the Great Resignation highlighted (once again) how vulnerable firms are when they rely on manual processes and a few lynchpin employees.
Outsourced or co-sourced technology frameworks offer the flexibility and resilience so many institutions lack. With a third-party partner looking after the technology, investment firms are free to focus on their clients and investment decisions. Agile front- and back-office operating models allow managers to adapt to adverse conditions and enrich their offering in response. And with a system or service conducting the heavy lifting, key person risk can be minimized or even eliminated.
Political Uncertainty
The war in Ukraine, coming on top of geopolitical tensions elsewhere, bring profound implications for firms’ operations.
Accurate, real-time views of portfolio positions and exposures, and a true multi-asset system that allows easy diversification into different asset classes and geographic markets to limit risk and bolster returns have become an essential part of every manager’s toolkit. Operations should never be the reason firms’ front offices are unable to act.
The evolving international sanctions regime highlights the importance of comprehensive customer relationship management (CRM) capabilities and the need to interrogate the data. Hacking is another growing threat, one that poses a huge test for the security of investment firms’ in-house networks. Specialized technology providers with dedicated cybersecurity expertise and the necessary R&D resources are far better placed to keep pace with the evolving danger, while allowing firms to concentrate on their core competencies.
Economic Pressures
After years of benign economic conditions, the pressures are mounting thick and fast. Growth in many markets is anemic, interest rates are climbing, inflation is surging and wages threaten to follow suit.
With business costs accelerating, expenditures will be scrutinized ever more intently and need to be justified. This emphasis on cost control is all the more important given the industry’s ongoing fee squeeze and client demands for greater price transparency.
The days of manual-heavy processes are gone and have been replaced with systematic technology-driven workflows. These resources deliver the end-to-end efficiencies and quality output needed to rein in costs and boost profitability.
System-enabled automation covering all parts of the transaction and client lifecycles exists—from digitalized, self-service front-ends on. And the capabilities are improving all the time. The investment managers that can weather today’s storms and position themselves for future growth will be those that take advantage.
Success Factors
Especially during periods of market stress, investment management success depends on focusing on your strengths—and getting professional assistance with everything else.
Do you devote your resources to analyzing output, or creating it? Are systems bearing the operational load, or your employees? Are your processes doing what they are supposed to, and in the most efficient and timely manner possible?
Tough times are when we’re most likely to learn, adapt and move forward, because we have to. Use today’s challenges to embrace technology and the potential it offers to make you stronger, more efficient, and better placed to deliver superior service and grow.
