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have no room for error to deliver on performance. With more
complex products being developed by clients all the time, many
have found their in-house teams do not have the ability to
perform traditional functions like NAV which they had previ-
ously done with mutual and long/short funds,” says JP Morgan’s
Doherty.
The changing buying behaviour of investors has also meant
that investment managers are having to adapt their technology
as existing systems are not able to handle the complexity of new
products.
For example, for a traditional long-only asset manager, existing
accounting systems that have been only used to assess the value
of traditional asset classes will not be able to calculate the value
of a real estate or an environmental, social and governance
(ESG) portfolio.
Data challenges
“Traditionally, service providers have been able to take informa-
tion from standard market providers and relay that back to the
client’s technology interface. With real assets, the information
is not as easily accessible,” says Rachel Turner, head of asset
manager solutions, EMEA and APAC, BNY Mellon.
“The tools you need to interface with the market are differ-
ent, and how you record the assets is completely different. Our
approach is to deliver an open architecture that allows us to
deliver the best service, via a consistent and harmonised data
interface.”
“Traditionally, service providers have been able to take information from standard market
providers and relay that back to the client’s technology interface. With real assets, the
information is not as easily accessible.”
RACHEL TURNER, HEAD OF ASSET MANAGER SOLUTIONS, EMEA AND APAC, BNY MELLON
These new products also bring with them a whole new set
of data demands that asset managers are required to deliver
to their own clients. This has prompted a tactical change from
securities services firms who are now buying up front-office
technology companies with the aim to provide a one-stop shop
that is a full front-to-back solution.
This has been exemplified by State Street’s $2.6 billion of
front-office technology provider Charles River Development,
and SS&C’s deal for Eze Software.
Northern Trust is another custodian currently rolling out a
new outsourcing model that can take on the entire workflow of
an asset manager across the front-, middle- and back-office.
“Where managers can be in-house asset owners or regular
asset managers, they are eager to add efficiency across the front-
to middle- and back-office. From the moment, the manager
knows what they want to buy, our new model takes them from
execution, to clearing, settlement, all of their middle-office
activity, as well as their regulatory and oversight functions. It is
the traditional outsourcing model on steroids because it brings
in trading and execution,” says Penelope Biggs, chief strategy
officer, Northern Trust.
One stop shop
Outsourcing entire trading and back-of-
fice operations with just one bank can flag
some concentration risk issues, which is
often the counterargument to fully out-
sourcing to one provider. However, Biggs
explains that Northern Trust’s new model
can cater for clients that have relation-
ships with other banks.
“There is an argument about leaving all
your assets with one bank, and as such
this model is agnostic, which allows some
to have their assets under custody with
another bank, while we perform the front
and middle-office activities,” adds Biggs.
As asset managers become more spe-
cialist and more niche in their demands,
some may require more than one service
provider that can deliver the best quality
service to individual functions. One asset
manager recently commented that if
Fall 2018
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