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The art of transformation
Margin compression , new markets , and COVID-19 have created huge strains for asset managers , forcing them to review their investment operations . What solutions will firms look to turn to as they aim to transform their operations ? And how much of a role will custodians play , asks Joe Parsons .
Better . Faster . Leaner . Stronger . Agile . Efficient . Transformation . No , this isn ’ t the start of a Daft Punk song , but in fact the objective that many asset managers are hoping to achieve for their investment operations in a world of unwavering performance and profitability pressure . Much has been reported on about the supposed decline in traditional asset management . Years of continued downward pressure on fees , along with the transition from active to passive investment products has weighed considerably on the business models of firms . Even before COVID-19 , active asset management was struggling to keep up . According to figures collected by Deloitte , US passive domestic equity funds outperformed and outpaced US active domestic equity funds in terms of assets under management ( AuM ) growth between 2010 and the end of 2019 . In this high-pressure environment , the investment operations of buy-side firms have grown in importance in order to achieve efficiency and function at the lowest cost possible . " As technology evolves , the expectation is that you can make your investment operations more efficient , which will reduce costs and be passed on to investors through lower fees . Investment operations are key to providing a good service to end clients . Digital technology allows you to transform your business , you should apply that to things like client reporting and performance measurement reporting in a more meaningful way ,” says Mike Tumilty , global chief operating officer , Aberdeen Standard Investments . That being said , the investment operations of buy-side firms have seldom met this expectation . A joint study by Accenture and the Investment Company Institute in 2019 , found a number of stark realisations on investment operations in asset management . For example , nearly half of operations executives surveyed believed their operations and technology are not configured to adequately execute the firm ’ s overall strategy . The disruption caused by the pandemic has provided another catalyst for firms to re-evaluate their investment operations as they look to tackle these headwinds . “ As asset managers look to grow their AUM and move into broader asset classes , one of the main challenges is having a scalable investment operations platform that is able to support in sync . For global managers , a lot of legacy systems are local and built for a particular market . How to harmonise that is a big factor in meeting more timely and agile data delivery ,” says Gem Pushpaharan , chief operating officer , Allianz Global Investors US .
Transformation powered by data Data has become a central component to asset managers ’ transformation programmes . According to a C-Suite survey of over 50 global asset managers , conducted by Brown Brothers Harriman ( BBH ) in December last year , more than half said they are looking to grow their
“ As asset managers look to grow their AUM and move into broader asset classes , one of the main challenges is having a scalable investment operations platform that is able to support in sync .”
GEM PUSHPAHARAN , CHIEF OPERATING OFFICER , ALLIANZ GLOBAL INVESTORS US
28 Global Custodian Spring 2021