Headstrong, the leading IT consulting company for financial services, today announced the results of their recent survey, conducted by TowerGroup, directed at providing perspectives on the middle and back office challenges in asset management. The survey results, which will be presented at an event on September 29th in New York, indicated firms are seeking to lower costs, reduce risks and structure operations and technology to be more flexible and efficient.
The survey, conducted by TowerGroup, analyzed issues and best practices of 40 asset management firms in improving efficiency, productivity, cost reduction and implementation of flexible IT and operations infrastructure.
According to the survey results, profitability has suffered due to costs and headcount associated with operations and technology in transaction processing areas. More than 70 percent of tier 1 managers and 43 percent of tier 2s responded that they have already outsourced processes or are planning to do so to reduce costs. Furthermore, the survey found that employee costs, 33 percent, make up the largest proportion of total IT spend. Along the same vein, the survey results highlighted the advantage of larger firms in relation to IT headcount productivity; on average tier 1 asset managers can spread the costs of IT staff across eight times the volume of assets of tier 2 firms and as much as 50 times the volume of tier 3 managers.
Patrick Schena, Principal, Investment Operations Services, Headstrong notes, “The survey reveals a number of interesting trends in the operational practices and back-office spending patterns of institutional asset managers and reaffirms the central role of cost and productivity enhancements among all managers. The survey also indicated that firms are facing similar challenges; data and system integration, data quality and process or technology complexity were cited as the top three challenges in the back and middle-offices of buy side firms.”
To ensure a more accurate view of enterprise risk, firms are investing in the automation of reference data, with 39 percent increasing their IT investments either moderately or significantly in the next 12 months. These types of large commitments are being made across all size tiers, emphasizing the importance of productive data management to the industry.
With relation to efficiency, tier 1 firms indicated that the most headcount was allocated to reconciliations, reference data management and compliance. Tier 2 firms, in contrast, specified reconciliations, portfolio accounting and trade processing as the three main areas of headcount distribution. All firms named reference data discrepancies as the major reason for reconciliation exceptions. Large proportions of the surveyed firms are increasing their investments in automation of reference data management as a result, and also in client reporting infrastructure.
Dayle Scher, Research Director, Securities and Investments, TowerGroup says, “It is not surprising, in this period of re-focus and re-examination, that asset managers are taking a step back to really think about what their core functions are, and what they should be. Determining how to achieve cost savings and efficiency in the back and middle office is clearly a top of mind issue for the industry, as evidenced by the survey results.”
Source:http://www.americanbankingnews.com/2010/09/28/headstrong-releases-buy-side-operations-and-technology-survey-assessing-major-issues-facing-asset-managers/
