SEC Modernization Regulation Highlights the Benefits of a Single Flexible Data Foundation for Regulatory Reporting

Mike Maltby, Head of Market Strategy

We preach data centricity at Eagle because it is becoming essential for investment management organizations to have a solution that offers a controlled environment to navigate both ongoing and evolving compliance demands. The data centric approach is also followed by many of the firms that Eagle works closely with , such as Donnelley Financial Solutions, to deliver solutions to current and future regulatory requirements. For instance, last year the SEC proposed and has since passed wide-ranging changes that would introduce new monthly and annual reporting forms (N-PORT and N-CEN, respectively). The SEC now requires “census-type” information as well as portfolio reporting in which fund managers and registered investment companies must provide enhanced and standardized disclosures. The initiative is designed to enable transparency for investors and more thorough analysis by regulators.

With the specifics of the proposal now clear, the SEC identified that it will be seeking data related to the pricing of portfolio securities; information regarding repurchase agreements, securities lending activities and counterparty exposures; terms of derivatives contracts; and discrete portfolio-level and position-level risk measures to interpret fund exposure in changing market conditions. Both the N-PORT and N-CEN filings have already been incorporated into other amendments floated by the SEC, including the proposal in December 2015 for new derivatives rules for registered funds and business development companies.

Make no mistake, the demand for accurate and timely data is only going to increase as new regulatory rules are put in place. The SEC’s reliance on data and standardization will only increase the scrutiny on a firm’s ability to meet these heightened demands. Those that have a strong data platform that helps them keep pace with the evolving regulatory environment—without disrupting their organization each time a new rule or amendment is introduced — will have a distinct competitive advantage over those who cannot.

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Engage 2016 Preview: Bracing for the Digerati

Gartner’s Dale Kutnick, who will be speaking at Engage 2016, discusses how digital disruption in financial services will challenge traditional business and economic models.

This year at Eagle Investment Systems’ Engage 2016 client conference, the prospect of digital disruption will be a prominent theme for many attendees. Gartner Senior Vice President, Emeritus, and Distinguished Analyst Dale Kutnick, who will be presenting at the three-day event in November, spoke to Eagle ahead of Engage to highlight some of the key issues facing financial services companies as they prepare for the coming digital wave.

Eagle: We’ve witnessed growing interest in financial services from many of the largest and most well known tech and software companies, such as Google, Amazon, Alibaba, and others. Why should the incumbent operators in the sector view these companies and the growing pool of fintech startups as a potential threat?

Kutnick: The advance of the “digerati” into financial services hasn’t yet been all that pronounced, but we think that will soon change. If you look at how they’ve already altered the landscape in the payment-systems space — all in a relatively short period of time — you can get a real sense of the threat that these tech companies will pose to existing business models.

But, I don’t think you’re going to see a situation in which a disruptive technology puts everyone out of business. The bigger players are already adapting. Fidelity and Schwab, for instance, have introduced their own robo-advisory offerings to compete with Betterment, Wealthfront and all of the other automated wealth-management platforms.

In terms of preparing for the threat, there’s a big focus on becoming more agile. Among the bigger banks, as their back- and middle-office functions become automated, you’ll see innovation translate into far more streamlined and efficient operations.

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Establishing a Modern Risk Framework

Marc Rubenfeld CIPM, Head of Eagle Solutions, EMEA/APAC

As volatility returns amid growing uncertainty in the economy and global markets, there is again a heightened focus on risk. For many investment firms, this renewed attention on potential worst-case scenarios came out of the financial crisis as regulators and investment firms sought to avoid a repeat of the 2008 meltdown.

While historically firms have focused simply on risk management as a single discipline, it can be more helpful to break it down into two distinct but complementary components; risk measurement and risk management. In treating these functions separately, firms are seeing both the benefit of an independent way of measuring risk and of aligning the risk measurement function with the performance measurement function. Furthermore, by using a single, high-quality dataset to support unified risk and performance analysis, firms are able to achieve new insights and more consistent results. This is a subject that I have discussed at conferences this year across Europe and Asia, most recently at the FTF Performance Measurement Europe conference in London.


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Eagle’s Cloud Native Journey

Helping clients achieve operational efficiencies and respond to new business challenges by delivering product features faster using cloud technologies 

Mike Fitzgerald, Head of Information Technology and Operational Services

In a recent Gartner survey of CEOs and senior business executives, roughly half of those polled highlighted that as a result of the digital transformation confronting their businesses today, their industries could be unrecognizable within the next five years. The overwhelming majority of those polled viewed the coming digital disruption as a positive force—one that would spark innovation in a way that will improve the client experience and support margin growth. This is a topic that is front and center at Eagle, particularly as we assess not only how technology can change the investing landscape, but also our role in helping firms efficiently manage assets, support business growth and enable shifts in business strategy.

It should be noted that this eye towards building the FinTech company of the future will be on full display this November when Eagle and BNY Mellon will host the Engage 2016 conference in Orlando, Florida. Over three days we are excited to be joined by clients, third-party vendors and fellow industry thought leaders to discuss our thoughts on cloud native applications among other topics that are set to define the future of financial services.

As part of our evolving vision, we at Eagle see a future in which organizations can experiment with new business models, leveraging data and analytics to identify the patterns that work and quickly abandon those that do not. Software will be delivered quickly, consistently and reliably at scale, while automation—through eliminating rote tasks—will intensify the performance of individuals and teams. The end result will be a high-trust culture, enabled by a conviction borne of real-time, high-quality data, instantaneous insights and thorough, transparent testing that sheds light on analytics and code coverage. We believe this seemingly fantastic future is actually achievable through the adoption of cloud native applications, which will offer the performance, system scalability and resiliency that will be required from next-generation platforms in the years ahead.

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15 Years in Canada: Creating a Model for Global Engagement

As we celebrate our crystal anniversary, commemorating the launch of our Toronto office in 2001, Eagle’s growth in Canada reflects our “all in” commitment to the markets in which we operate.

Joel Kornblum, Head of Partner Relations and Client Solutions

Canada’s financial and capital markets landscape has always had a reputation for stability and prudence, yet that should not overshadow the financial innovation that regularly comes out of the country. Let’s not forget that Canada produced Nobel Laureates Robert Mundell, the father of the “Euro” and supply-side economics; Myron S. Scholes, the architect of the Black-Scholes model for valuing options; and William Vickrey, one of the first to apply game theory in understanding auctions.

As Eagle has been active—and present—in Canada for 15 years now, we have witnessed firsthand the innovation and collaborative spirit that is quite unique to the country. We also recognize how valuable our clients in Canada have been in helping shape our product set to meet the evolving demands of the global marketplace. With relationships that go all the way back to 2000, we continue to build upon a network of leading asset managers and pension funds in Canada that count on Eagle to understand their distinct market and facilitate efficient growth.

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Managed Services and Data Readiness to Manage Extreme Market Events

Brexit provides an example of how a managed services offering is helping clients manage and optimize their investment data to navigate market events

Liz Blake, Global Head of Front Office Services, BNY Mellon Technology Solutions

In the days leading up to the UK’s historic referendum to leave the European Union, polls were in a dead heat with a slight edge towards those that intended to vote to remain in the EU. When investors woke up to news that Britain actually voted to leave, it triggered a wave of selling around the world that resulted in the largest two-day sell-off on record with global financial markets losing some $2 trillion during the trading sessions that followed.

While the results took many investors by surprise, for the clients signed up with the Front Office Services Group (a group dedicated to the managed services around Eagle’s enterprise data management and performance solutions), the Brexit vote provided a case study to demonstrate the role of our managed services offering in helping clients prepare for the unexpected. For a managed services team, success may be best reflected in the ability of the front office to focus unencumbered on the markets, rather than worrying about the accuracy and availability of critical data or the firm’s ability to easily move into new investment types.

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Webinar Recap: Dual-Track RFP Processes Used in Replacing Legacy Technologies

Eagle’s July webinar with WatersTechnology highlighted how buy-side investment firms are increasingly investigating not only stand-alone software solutions but also managed services and fully outsourced alternatives to replace outdated portfolio management and accounting technology

Mike Maltby, Head of Market Strategy

In July, Eagle participated in a WatersTechnology webinar discussing best practices around legacy system replacement and the critical role portfolio management and accounting systems can play in supporting business growth. One of the key takeaways from the webinar was the growing tendency among buy-side firms exploring new solutions to pursue a “dual-track” RFP process. Increasingly, asset managers will simultaneously weigh both the costs and benefits of choosing either a hosted software solution—including possible managed services—or a fully outsourced alternative that hands off the entirety of the day-to-day management to a third-party provider.

The webinar featured Prescient Chief Operating Officer, Craig Mockford and Desjardins Senior Advisor, Mario Coulombe in addition to myself, while WatersTechnology Editor in Chief, Victor Anderson moderated the discussion. Held on July 13, a free replay of the conversation is available here.

The webinar highlighted the extent to which buy-side firms are operating with sub-optimal and outdated technology as well as what the business ramifications can be when vendors either begin to sunset older systems or fail to reinvest in mission-critical technology. Over 40% of the more than 250 viewers that attended the webinar indicated that their own organization is currently running an outdated or obsolete portfolio management or accounting system, and over a third cited that legacy-platform and vendor risk represent the greatest challenges to growing their business. In discussing a starting point to address this threat head on, Prescient’s Mockford noted that for his firm, the initial objective was to understand all of the possible alternatives by sending out RFPs to key software vendors as well as the top outsourcing solution providers.

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The Superannuation Funds Insourcing Equation

Marc Rubenfeld, CIPM, Head of Eagle Solutions for Europe, Middle East, and Asia-Pacific

Eagle Investment System’s Marc Rubenfeld, in an article published in Australia’s Financial Standard, explores the growing trend of superannuation funds building in-house investment teams to assume greater control and deliver greater cost efficiencies to their members. The article, “The Superannuation Funds Insourcing Equation”, highlights the technological considerations that need to be addressed and the capabilities needed to support the insourcing of asset management.

With two-thirds of Australia’s superannuation funds planning to bring asset management in-house in the next 10 years, Rubenfeld explores some of the reasons behind this growing trend including cost reduction, an increase in fund sizes and the desire for funds to get closer to their assets. He writes that “if institutions overlook the technological demands, the desired efficiencies, cost savings and member benefits will quickly be lost in transition”.

Download the full Financial Standard Article

Legacy Systems: Vendor Consolidation a Catalyst to Obsolescence

Vendor M&A typically comes with promises of synergies and added value, though recent history suggests it can also shorten the runway that leads to a legacy system

Dan St. Onge, Chief Operating Officer, Eagle Investment Systems

Over the past 30 months, technology-focused investment bank Hampleton Partners has tallied 596 acquisitions in the financial technology sector, with 75% of the activity involving either enterprise software or enterprise services companies. Parallel to the escalating deal volume has been a significant bump in valuations, as the median purchase multiple has grown from 12x EBITDA in 2013 to 15x EBITDA last year. While many in the industry may be inclined to celebrate this activity as a coming of age for financial technology, for clients – when their vendor is acquired – it’s often a signal that their relationship is about to undergo an abrupt and significant change.

Consider, for instance, the announced retirement of the Barclays POINT risk analytics platform. Barclays sold the platform in December, and soon after Barclays POINT users were informed the new buyer was only interested in the IP and would be shuttering the POINT platform within 18 months. According to a Citisoft survey, 80% of users now plan to initiate a process to find a new vendor.

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