Matt Brousse Considers Technology Necessities for Asset Management Firms in a Challenging Landscape
Q: How have the needs of investment managers changed in the last decade?
The downstream ripple effects of these challenges include the proliferation of passive strategies, lower-risk profiles, better fund accessibility and lower costs. Investor demand for transparency is driving long-only asset managers to provide better fund visibility and adopt more diversified strategies.
At the same time, funds are navigating one of the most complex times in the global economy. If you look at the last 10 years, there has been one major global initiative after another that has resulted in broad-sweeping changes on their business. From Dodd-Frank in 2010 to the expansion of requirements around Ucits, AIFMD, MiFID, GDPR, and, most recently, macro changes and market volatility brought on by Covid-19.
As market turbulence manifests in everyday trading, investment managers need fast liquidity and portfolio access to maintain efficient processes, anytime, anywhere. Now more than ever, asset managers need to leverage technology to automate manual and timeconsuming processes and drive down their costs so they can focus on the things that drive their business: idea generation; discovering market inefficiencies; and alpha generation.
Q: How can technology help?
When you look at what asset managers are doing today, firms that are creating technology scale are growing and doing well. The firms that have found the right technology platforms and the right partners have created an ecosystem that operates more efficiently and that they can manage in a streamlined and transparent way. This integration will streamline processes and help mitigate the risk of multiple datasets moving throughout your ecosystem. For all our clients at SS&C and SS&C Eze, our goal has been to ensure that regardless of the partners you choose, we can help facilitate the most efficient ecosystem for each firm.
Q: What are the key tenets of a tech solution?
Investment technology needs to be set up in a way where you have the flexibility to evolve your business. In essence, your platform should help you adapt to strategy changes, accommodate SMA rollouts, and ultimately help deliver on your investor demands. If we've learned anything over the past decade, it's that you need to be ready to facilitate investor demands at any point in time. Meeting investor demands may include a deviation of the strategy, adhering to different jurisdictional regulatory requirements or individual investor mandates. You don't want your technology to be inhibiting your investment strategy. The firms that will continue to gain traction and grow will be the firms that can take the business and their assets in any way, shape, or form for the investor. Nobody wants to turn assets away, so a platform that offers scalability, flexibility, and is there to partner and evolve with you as you grow the business, is a mandatory requirement for any vendor.
Q: What are the critical tools needed by investment managers to succeed today and to continue growing?
The tools can be broken down into a couple of key categories. An order management system (OMS) is a requirement at this point, whether that's for efficiencies, investor due diligence, or being able to run the business effectively. But an OMS is no longer just for order management - it now functions as a mission-critical backbone of your infrastructure. When implemented effectively, the OMS creates transparency and streamlines all workflows and processes associated with the full investment lifecycle. An OMS facilitates data transformation and transparency for investors and counterparties for all of your different teams.
The OMS from the last decade does not compare to what we have today. OMS functionality is not just about position checks and allocations anymore. Now, your OMS needs to bring together all your critical functions, such as compliance, that have to be integrated into every core workflow. Post-trade only compliance doesn't cut it anymore. Compliance needs to be checked at all stages of the trade, including pre- and intra-trade, because it's getting too expensive to handle things afterward. You need a flexible platform so that you can cater to a new strategy dynamically, or so that you can cater to a new investor that wants to invest in separate or commingled products. These capabilities should be a core part of what we now call the front-office investment suite.
Another vital aspect is configurability; this becomes a paramount consideration because no two asset managers and their workflows are alike. A one-size-fits-all solution works for everybody and nobody at the same time. You want your platform to be configurable, to blend best practices and standardized workflows from a global community of your peers, but also come backed by a vendor who is willing to partner with you. Your vendor relationship is not just about providing production support, but that added expertise and consultation to ensure the system grows and adapts with you as your needs change. Configurable solutions like this grant a significant upside in terms of how you scale the business in the future.
Asset managers have moved away from building their solutions, too, or buying a solution that can be developed in-house. There are many more distractions now from managing ongoing cybersecurity threats to navigating an increasingly competitive market where it's harder to stand out. A 'build it yourself' solution is challenging to keep current. Most firms don't have the resources to staff hundreds of developers to keep pace with new trends and investor demands and ensure they stay competitive with their peers. You can't satisfy the needs of today's market demands using the technology from yesterday.
Q: What should investment managers demand from their vendors today?
Our partners on the asset management side are being asked to do quite a bit by their investors. They're being asked for greater transparency, increased strategy and portfolio diversification, standardized compliance, and a guarantee their data is and will always be protected. Asset managers should be asking the same thing from their vendors. Fundamentally, you need an experienced partner that can bring a well-rounded suite of tools to the table, striking the right balance between technology and service that is hightouch and scalable for the future.
This piece was originally published by Fund Intelligence.
About Matt Brousse
Matt Brousse oversees asset management sales and business development for SS&C Eze in the US and Canada. Matt has been advising and consulting asset managers on investment management technology solutions for nearly 15 years. He joined Eze in 2007 and has held numerous leadership positions across client service and sales including head of client service for the US east coast and eastern Canada where he was responsible for solution design, implementation, consulting, training, and support for hundreds of asset managers and hedge funds.