Technology for a cleaner edge

Technology can help improve productivity and free up talent in asset management for broader client-focused roles. However, companies need to change their culture to keep pace with ever-changing ways of doing business.

This feature comes from our 2022 Specialized Fund Administration Report. Access the full report now!

Cost pressures, spikes in volume and volatility, and unwieldy legacy systems are nothing new to the operational departments of asset management companies. However, these challenges have worsened over the past two and a half years, reinforcing the need to review middle and back office processes. Now more than ever, businesses that fail to embrace the digital world will be left behind, perhaps forever.

The shocks follow one another. Few expected soaring inflation and war in Europe to follow pandemic-rocked markets. Along with the rapid and seemingly permanent transition to hybrid working, the scale and pace of organizational change is unprecedented.

Of course, technology has always been part of the asset management solution. But it’s only a catalyst, there to manage assets, mitigate risk and provide tools to take advantage of opportunities. Today, the new paradigm of work requires a whole new mindset where new tools are no longer viewed solely as a way to cut costs and grow businesses faster.

Technology can – and should – drive collaboration in hybrid environments and help establish a company’s culture. The younger generation of workers has grown up with intuitive web tools and mobile apps. Modern solutions are needed to keep them engaged. Younger employees increasingly bring a strong technical background to the workplace and expect to programmatically interface with technology solutions, increasing the demand for open-architecture systems.

Data issues
Getting the right mix of technology and human intelligence is more vital than ever, especially given today’s skills shortage. For example, companies can use AI and machine learning to increase process automation in back-office systems, replace long-standing manual tasks, and allow staff to easily find and address exceptions instead. than looking for them in dozens of reports. However, this requires accurate, clean and, to some extent, structured data. Effective data management systems will in turn enable staff to apply their expertise to improving other aspects of the customer experience.

Yet proven enterprise systems are often no longer suitable for this purpose, at least by themselves. Flexibility is the new mantra. Cloud-native applications, web-based solutions, and the ability to integrate them with proven core systems – sometimes in combination with managed services – will be the way forward.

Whichever operating model you choose, a key ingredient for success is clean, reliable, high-quality data. Having access to a “golden source of truth” is no longer just a benefit, but a requirement for companies to deliver profitable results, differentiate themselves, offer the required levels of transparency and reduce the risk of non-compliance. regulatory conformity.

Naturally, fund managers and administrators will have amassed huge amounts of data over their history. Often this is in a disparate set of applications and platforms. The challenge now is to collect this data and assess whether it is clean, structured, accurate, and ready to use in financial models and reports.

Effective data management is not an easy task. In the area of ​​ESG investing, the issues have been well highlighted by recent regulations, such as the EU Taxonomy and the Sustainable Finance Disclosure Regulation. The fact is that to support their ESG ambitions – and those of their clients – fund managers need to produce much more granular and detailed information than in the past, not only at the fund level, but also at the individual security level.

Europe is ahead of the regulatory curve, but the US is not far behind – and, following the SEC’s recent and ongoing greenwashing review, it is arguably now moving faster.

To meet demanding new anti-money laundering regulations, fund managers must have access to rich ESG metrics to support portfolio strategy, product development, regulatory reporting and compliance monitoring. Having the ability to leverage ESG data streams in core applications not only reduces upfront costs, but can also help companies grow their ESG activities by attracting assets, asset owners – and even talent. socially responsible.

A digital facelift
Overall, having a one-stop-shop for compliance is becoming increasingly important as margins continue to be squeezed. The ideal is to use flexible systems that address the complexity of existing business requirements, offer intuitive rule-making tools, and meet the workflow patterns of compliance officers – whether at assets, fund administrators or custodians – while integrating it all into a single, robust compliance solution.

Comprehensive pre- and post-trade monitoring of investment restrictions should be real-time across the business, but also include fund-specific mandates and address any regulatory constraints that may affect them. All of this must be done while adhering to strict audit trail and reporting requirements.

Agile processes should also be applied to fund administration. A digital facelift could include the ability to choose applications from a modular, web-based fund administration hub that provides a common user interface; digital workflow management; data visualization tools; and exception-based process management. Automation can also streamline funds management operations, allowing companies to better manage costs, mitigate risk and improve efficiency.

The benefits are clearly evident on individual core functions such as Net Asset Value (NAV) generation and validation. NAV monitoring has traditionally been a labor-intensive manual task, where it is often and unfortunately done in spreadsheets. However, new web-based solutions focused on exception management are streamlining, standardizing, and automating NAV monitoring processes, including calculations, providing clear metrics, and reporting for auditing, consulting, and monitoring purposes. administration and regulation.

Instead of chasing problems, team members can handle exceptions as they happen while focusing on core business skills such as improving operational performance, mitigating operational risk, and providing solutions. transparency and improved customer service.

Change the culture
Ultimately, technology should improve productivity and harness the power of the workforce. However, asset managers must be prepared to change culture to keep pace with ever-changing ways of operating. Flexibility, agility and automation are the key words if they want to maintain and refine their advantage.

This feature comes from our 2022 Specialized Fund Administration Report. Access the full report now!

©2022 europe funds

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