The Challenge
The investment manager operates in an environment which continues to present great challenges. The pressure to deliver the returns demanded by increasingly sophisticated investors challenges managers to develop products which harness ever more complex strategies. At the same time, managers must transparently and robustly manage the risks to which the investors are exposed. These pressures are increasingly taking investment managers into areas which have previously been the domain of alternative investment firms and investment banks - derivatives, structured products, liability driven investment (LDI). Managers require the tools to quickly and accurately analyse their risks and take advantage of market opportunities in the fastest and most efficient manner. These requirements have major implications for the front office – What impact will the increasing analytical needs of investment managers have on the technology landscape? How will existing workflows be impacted by the need to access new instruments and new liquidity pools?
Middle and back offices are, in turn, under pressure to meet the increased demands being made of them to support the 21st century investment manager. STP continues to be a major focus in ensuring that the cost base is controlled while mitigating both the financial and reputational risks of settlement and confirmation errors. New functions may be required to support increased demands for activities such as collateral, risk and investment lifecycle event management. Existing skills, systems and processes must be developed to deliver high levels of service to both internal and external stakeholders.
The challenge for the 21st century investment manager is to develop an infrastructure to support these increased requirements with robust, scaleable, cost-effective solutions. At the same time delivery must be managed within a controlled framework facilitating the balance between the acceptance of risk and the controls to mitigate it.
Adapting the operating model to capture these requirements while maintaining the balance between cost control and risk mitigation is a complex task. Where is the balance between cost and control? How much of the operating model do we really need to perform? How much can be outsourced and to whom?
