Solutions

Achieving Operational Excellence:
The Growing Role of Big Data

 As seen in the 2016 Mutual Fund Service Guide

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Using data science in the back office to improve processes and business performance.

Mike Maltby, Product Manager


Operational excellence has always been and continues to be the strategic goal and nirvana for asset managers and service providers. Operational procedures that have developed from constant human interaction and paper-based processing continue to haunt organizations that strive for operational efficiency. This has opened the door for technology providers to promote their evolving technologies and control environments powered by straight-through processing.

Yet, it is no secret throughout the mutual fund industry that true operational excellence continues to remain elusive. Mutual fund companies and third-party administrators continue their quest for operational excellence. The quest is fueled by the enticement of significant upside potential including:

For mutual fund companies, operational excellence enables the quickest delivery of the most accurate, highest-quality data to the front office.

For third-party administrators, operational excellence means reduced costs, better service value to clients and an ongoing competitive advantage.

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Decaying Platforms: Addressing the Growing Risks Posed by Outdated Portfolio Management and Accounting Systems

 

A confident businessman with briefcase walking ahead on a tightrope in empty grey urban space conceptAt recent Eagle Investment Systems client events in Chicago and Toronto, Citisoft COO Tom Secaur and Accenture Principal Michael Kerrigan offered their take on why so many asset managers have put off replacing their legacy systems, even as the enterprise risks grow with every passing year.

 

Jeremy Skaling, Managing Director, Global Head of Marketing


The challenge for many asset managers is that it can be difficult to actually define what a legacy system is. Unlike an automobile, there is no odometer from which to measure the lifespan. The most widely accepted definition is that a legacy system describes a platform or a vendor that can no longer keep pace with the growth of the business or evolution of the markets. It might be an internally built system that is no longer fit for purpose; it could be a platform running obsolete technology; or, in this era of consolidation, it could be a vendor that is effectively sunsetting a platform through inattention and waning R&D. The result? Years of customizations and patchwork modifications become twisted and dangerously intertwined. Sooner or later, the negative impact—be it poor data quality, operational inefficiencies or the inability to accommodate new products—can be felt throughout the investment management organization.

“You’ll see an accounting system sitting in the middle of an organization with point-to-point interfaces going everywhere…It’s a warehouse, a client-reporting system, an internal reporting system, it generates analytics, keeps pricing history, you name it,” Citisoft COO Tom Secaur described at the recent Eagle client event in Chicago. While Rube Goldberg would be proud, the prevalence of legacy systems actually represents one of the biggest threats facing many asset managers today.

At one point in time, these systems were likely fit for purpose and may have even been considered cutting edge at the time of their implementation. Fast forward 10, 15 or in some cases 30 years, however, and many of these systems today have not received the requisite investments to remain relevant. This is becoming even more apparent and the impact more pronounced as the engineers that developed the original technology and code hit retirement age, which leaves precious few professionals available who understand how to patch these systems as needed in order to keep them alive and functioning.

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PBOR: Aligning the Middle Office to Meet Escalating Front-Office Demands

Rich Mailhos, Product Manager, Performance Measurement


Rich Mailhos recaps a recent webcast featuring Eagle clients TIAA-CREF and Fort Washington Investment Advisors on the far-reaching value of PBOR

Those with graying hair may still remember the old days of performance reporting and the nascent technology that supported these efforts, marked by dedicated offices housing DEC VAX machines and rows of computers running Fortran code. A holdover of this era is the continued reliance on monthly custodial data and spreadsheets, even as data volumes grow and the various forms of data multiply. Those in the middle office tasked with performance measurement are all too familiar with the problems posed in trying to manage siloed data through Excel and in a way that meets the escalating demands of the front office. As these challenges reach critical mass, asset managers are increasingly turning to a Performance Book of Record (PBOR), a term Eagle introduced to the market in early 2015.

Such was the subject of the webcast I recently participated in that was hosted by WatersTechnology. Also participating in the discussion were Eagle clients, TIAA-CREF’s Senior Director of Performance and Reporting, Nancy Carola, and Fort Washington Investment Advisors’ Manager of Performance and Reconciliation, Tom Anderson. WatersTechnology Editor in Chief, Victor Anderson, served as moderator. Read More…

Empowering the Performance Team

Jeff Cullen, Principal Consultant and Vice President


Historically, performance measurement has been a discipline largely relegated to a supporting role within organizations both large and small, and performance teams have been responsible for what was primarily reactive and backward-looking analysis. Today, investment firms are, more than ever, looking to explore the possibilities of predictive and prescriptive analytics in helping to manage risk and improve performance. This requires an understanding of the consistency and quality of data across the firm, how to apply that data, and a skill in high-level analysis that spans across departments. It is no surprise that smart management teams have noticed that their performance teams are the nexus of exactly the type of data aggregation and skills best suited to unlocking this potential. At a recent discussion I took part in at TSAM Boston, one panelist noted: “Anything with a number attached to it is going to find its way to the performance team.”

That panel discussion, “Creating a Holistic Performance Measurement System”, focused on the nuances of these burgeoning capabilities. Joining me on the panel were performance executives from Aberdeen Asset Management and Acadian, while Bob Leaper, President of PanoVista.co, served as moderator. Sitting with these delegates was a great opportunity to gain insight from talented professionals in the discipline to which I have dedicated my career at Eagle.

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Absorbing Complexity:
Build the Moat

Investment managers and financial services firms are confronting a rapidly changing competitive landscape and their infrastructure can be a critical gating item in their pursuit of new opportunities

Mal Cullen, Chief Executive Officer


Clayton Christensen, in his seminal book The Innovator’s Dilemma, catalogued the various patterns of innovation that can occur within a sector, establishing a spectrum that begins with the repackaging of known technologies and ends with truly disruptive innovation that can turn an industry on its head, such as Uber or Napster. While the financial services sector has not faced the latter scenario in the past quarter century, the rapid growth of the alternatives space, coupled with new advances that have commoditized what were once considered exclusive and esoteric strategies, means that investment managers today are only now being faced with the question that Christensen so poignantly addressed in his book: How do you introduce new products and capabilities without being bound to servicing the customary needs of existing clients. The difference, at least for most financial institutions, is that, it is their existing clients who are calling for disruption.

Traditional asset managers realize that product innovation has become more critical than perhaps ever before. As McKinsey identified in a December, 2014 research paper (“The $64 trillion question: convergence in asset management”), certain secular factors are driving asset managers to build out their product set to meet the heightened and more expansive demands of their clients. The McKinsey research cited that a bifurcation is occurring between large and small institutional investors, with each group approaching their strategies differently to fulfill diverging portfolio needs. Whereas smaller institutions want access to a broad range of brand-name managers with product depth and perceived stability, larger institutions are migrating to more cutting-edge portfolio construction to build new capabilities and embrace “risk-factor-based methodologies.”

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Fixed Income in an Evolving Europe: Can You Measure the Permanent Impact of the Eurozone Crisis?

João Sousa Dias, Solutions Specialist, Eagle Investment Systems


Financial and political events since the onset of the financial crisis in 2008 have redefined sovereign risk in the eurozone. The disruption and its lasting impact has left fixed income investors searching for answers when it comes to measuring their “true” European exposure and determining the appropriate government yield curves to benchmark against. Many existing portfolio analysis and performance attribution platforms struggle to accommodate the new paradigm, which requires a new approach to fixed income performance reporting.

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Building the Business Case for Governance

Paul McInnis, Head of Enterprise Data Management, Data Management


When it comes to making the business case for data governance, Jim Stitt, Head of Data Management at RBC Global Asset Management, likens the exercise to measuring the ROI of keeping the home garage organized. Yes, there’s real value in doing so, but he asks, “How do you measure [the value of] the holiday decorations being where you expect them to be or the right tool is readily available?”

Stitt, participating in a recent webinar hosted by WatersTechnology and sponsored by Eagle, highlights one of the larger challenges when it comes to initiating a data governance strategy. While most executives recognize the necessity for clean, accurate and timely data—and, importantly, they acknowledge the role of a formalized and systematic strategy—making the case to senior leadership or gaining buy-in across the various business functions of a global enterprise can be a daunting task.

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FINcastle’s CEO Bevin Crodian Shares Thoughts in a blog contribution titled
Embracing Change:
Wealth & Technology

Bevin Crodian, CEO, FINcastle Consulting
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With the entrance of roboadvisors, wealth management firms with actively managed products are forced to take a closer look at finding ways to reduce fees and automate reporting. The opportunity to gain a competitive advantage through a scalable and efficient technology platform has never been greater.

From the perspective of mass affluent investors, the wealth management industry is still considering the direction that the so-called roboadvisors will pull the industry.  A couple of items are clear though, which is that the roboadvisors are driving an increasing focus on fees and technology, and that this trend will ultimately trickle up to the higher net worth markets.  If nothing else, full-service providers will have to equal or exceed the client-facing technology of these new entrants, and full-service fees over time will have to move closer to those of the roboadvisors, at least for parallel products and services.  Specifically for the actively managed allocations of separate accounts, fees will likely come down substantially.

If there is a positive outcome that stems from this fee compression for wealth managers, it’s that the industry will likely take a renewed look at fees and may come away from it with a better sense of best practices and greater standardization. There has been so little attention paid to the accurate description of fees in the wealth management industry that some have claimed advisors themselves consistently underestimate the total fees being paid by their clients. The roboadvisors are sometimes equally unclear about the total fees charged to clients.  In fact, when many in the industry refer to fees, they are just talking about the advisor’s share, rather than the total cost of ownership.
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