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Asset management: investing for growth

As the asset management industry returns to growth it’s apparent to me that firms are competing more than ever on a global scale and seeking alpha from new sources. But the challenge most face is how to prepare for growth and differentiate themselves in a globally competitive marketplace.

In early 2014 PwC’s 17th Annual Global CEO Survey showed that asset management CEOs are optimistic about growth, with 97% of respondents confident about their revenue prospects over the next three years. To support this growth, 81% of CEOs cited technology as a tool to transform their business and 89% said that IT needs to be prepared to capitalize on transformative global trends.

It’s clear that asset managers look to operations as a growth enabler, and need to ensure their operations systems are prepared for the challenges driven by their growth plans.

An investment accounting system that is outdated can negatively impact a firm’s ability to launch new products, enter new markets, optimize workflows, control costs and reduce human error and operational risk. Ultimately, all of these issues culminate in a larger problem – outdated systems impede decision making and ultimately impact investment performance.

Because each asset manager is unique, a modern accounting system must be flexible enough to address different operational requirements and be scalable enough to evolve over time. It must be able to trade and process a wide variety of assets, provide visibility and control over assets and be easily managed to ensure it is adopted and used across all operations.

It must also provide connectivity across an asset manager’s IT ecosystem. Connections must be established and reconciled with custodians, and data inputs such as securities and pricing must be seamlessly automated, preferably with exception management capabilities that ensure the integrity of data. Without proper connectivity, the accounting system cannot serve as a single book of records across an asset manager’s business.

Capturing all of an asset manager’s investment information is critically important, and far more complex than it sounds. During the market downturn, one of the biggest challenges facing asset managers was valuing a wide variety of securities. Many firms had deployed specific systems to manage certain security types, because their legacy systems couldn’t keep pace with the proliferation of new security classes. For example, firms that were once equity-heavy found themselves struggling to manage swaps using outdated systems, as investors increasingly sought alpha in more complex securities. As a result, many asset managers lacked the ability to view holdings and positions holistically, which led to poor management of risk and exposure and ultimately market losses.

Learning from this experience, firms that are now taking a proactive approach to put in place flexible solutions that enhance operational capabilities and provide visibility and control into assets will be best positioned to capitalize on opportunities for growth.


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