Strategic Update: Challenging Times for Investment Managers

The Australian financial services industry is undergoing a turbulent period with technology, regulatory and market changes challenging all areas of Australian financial service organisations.

Investment Managers are at the forefront of this and are facing greater pressures to not only continue delivering results to a broad range of stakeholders but to also position themselves for long-term growth.

Investment Management firms are recognising the need to:

–          Deliver sustained and material cost reductions in middle and back office processes

–          Provide scalable operational support to multiple investment teams across multiple jurisdictions

–          Operationally support unbundling of investment capability (model portfolios, implemented asset allocation etc.)

–          Develop an independent data model to support more complex investment management activities

There are four key areas in the investment management industry where Shoreline are seeing the most activity: –

Operational Efficiency

There is a clear drive to increase operational efficiency. Competitive pressures are squeezing the margins of investment managers, requiring improved operational efficiency of middle and back office processes. This supports further pre-disposition towards outsourcing of middle and back office to decrease cost base.

Operations Supporting Multiple Investment Teams

Many Australian investment management firms run a multi asset/strategy business model which bring its own set of challenges. Multi asset/strategy model requires operations to manage competing requirements from investment teams who often use different technologies and are based in different geographies.

Operational models are being implemented that have the flexibility and scalability to manage disparate requirements whilst still providing service on a cost competitive basis.

Improving Investment Management Processes

Competitive and client pressure is driving the need for more comprehensive investment performance and risk analytics. Coupled with this is the desire for clients to have access to performance and risk information electronically more quickly than before.

Effective management of this requires investment managers/middle office providers to develop their own independent data management capability as well as seamless integration with performance and analytics systems.

Unbundling Investment Capability

Increased sophistication of investors is driving change from a ‘one size fits all’ investment product towards customised investment solutions. Access to accurate, timely, complete and reliable investment data remains the biggest challenge to fulfilling this need. Combine this with the use of multiple custodians and the challenges faced multiply.

Effective delivery of unbundled investment capabilities requires a technology platform and internal processes to support this. This can often prove problematic where there are legacy systems and processes structured to support bundled investment capabilities.

Where To From Here

For senior management this presents a unique opportunity to reinvent their businesses and position themselves better for future growth. However, to do so presents challenges as many organisations are at varying stages of readiness to implement change.

It also raises the question of where to start given the BAU requirements often do not allow firms to allocate the resources required to focus on major transformation projects.

This is where Shoreline can assist. The first step would be to deep dive and benchmark the current operations and organisational structure against market practice and undertake a gap assessment of the operational model’s ability to enable the business strategy.

The objective would be to identify the areas that need to be focused on first and where the firm would get the most bang for their buck.

This would be followed by the development and implementation of a target operating model.

Shoreline has deep insight gains through years of practical experience on the latest developments and trends in data management and investment operations across a wide variety of investment firms and asset managers, both here and in Asia.

Please don’t hesitate to contact us if you would like to discuss further.

Chris Robertson

Associate Director

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