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Optimising Your Portfolios with Future Investment Operating Models

Our very own Bruce Russell was featured in the July issue of the Financial Standard – discussing the future of investment operating models.

In a period of rapid societal, regulatory, and technological change, today’s asset owners are more frequently reviewing their investment and operational strategies as they continue the pursuit for operational efficiency and investment returns.

Increasing regulatory transparency and governance obligations are driving institutional investors to look for the right blend of outsourcing and insourcing of core activities to deliver the necessary governance, oversight and efficiency for their investment portfolios.

The optimal insourcing/outsourcing mix of investment, operational and execution capabilities have therefore become critical strategic decisions for today’s fund executives.

“Asset owners and asset managers around the world are demanding increased visibility, accuracy and timeliness in their investment management.”

Asset owners increasing their in-house investment capability need to ensure that the business case for the change is understood by the appropriate stakeholders. The investment and operational implications should be documented and clear, and the culture of the organisation must be ready to embrace the new model. Whilst the investment business case is often clear, the operational and cultural implications of the decision may not be fully appreciated.

“Fund managers are weighing up how much internal expertise they need to ensure they continue to meet their regulatory obligations…questioning whether they should insource or outsource, and if they do outsource, they are demanding a high level of oversight and governance of their providers.”

There are risks in porting across IT solutions from an ‘asset management’ system to an ‘investment management’ system – the latter being the unique view required by asset owners. The requirements of the two systems can be very different. Being a fund manager and an asset owner and trying to manage whole-of-portfolio is very different from running a specific asset class, in the way you look at the portfolio or workflows and make investment decisions.

Developing a target operating model can help guide strategic change and ensure details and a variety of scenarios are adequately considered. A fixed vision of what things are going to look like in five years’ time could unravel as technology, business models and regulations change.

Bruce Russell

Director

Source: Financial Standard, July 2019 Issue

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