Addressing delegates at the recent Fund Forum investment conference in Monaco, he challenged third-party fund administrators to “really step up to the plate and make sure that you can help us deliver what the clients need.”
Mr Yates was referring to what he saw as a lack of commitment on the part of both fund administrators and asset managers to invest and keep investing in the financial software necessary to handle investment instruments such as derivatives.
He observed: “Adapting long-only systems to deal with OTC derivatives is a long and difficult job as we have found over the last two years. Fund managers are moving forward quickly on derivatives and this requires a large amount of effort by the fund manager to be able to deal with these new instruments safely, rather than being able to buy off-the-shelf software or admin solutions as is the case for the long-only business. In general, fund managers are moving faster than their third-party administrators who are probably 18 months behind. The TPAs need a major and sustained effort to catch up.”
Echoing these sentiments, Helena Morrissey, CEO of Newton Investment Management said it was important that asset managers and fund administrators maintained investment in the latest technology.
She contended: “If you are going to evolve and have services adapt to changing needs, you will have to earmark considerable amounts of money each year for investing in new technology and if necessary start again with certain systems. There is a price to pay to compete.”
Elizabeth Gee, sales director at asset management software vendor, SimCorp, said it was difficult sometimes to gain access to senior managers at investment houses and fund administration firms who made the “strategic” purchasing decisions. “In some cases, we have given up trying because we have been rebuffed so many times.”
She pointed out that companies tended to look at software issues from a tactical rather than a strategic perspective and as a result, the buying decision was left to the IT director or the operations director.
Where financial software vendors had failed, Ms Gee noted that outsourcing service-providers had succeeded by gaining “the right access” and selling a strategic vision.
But not everyone blamed the investment managers and fund administrators. Didier Roubinet, vice president European strategy, institutional asset management and securities servicing at software vendor, Sungard, said that in the past year his company had been slow in providing the necessary technology to fund administrators and to the back offices of asset management firms.
In a bid to address the problem, Sungard had invited asset managers to take part in a newly-established “scientific committee” for the purpose of advising the firm on improvements to the functionalities and coverage of its software products.
Mr Roubinet observed that fund managers looking to launch investment products which incorporated derivatives instruments were impatient to get hold of the latest software. By contrast, fund administrators seemed to be in less of a hurry to update their systems. This was surprising given that back-office service-providers were in the “messy” situation of operating two different systems to cover international assets and of having to combine two separate databases to fulfill their risk monitoring and compliance requirements. The challenge was to achieve connectivity between the two systems.
Stewart Copland, a consulting director at investment management consultancy, Etheios, maintained that financial software providers were doing a good job in identifying front to back office solutions and achieving STP from front to back.
The problem he said was that the asset management industry had grown through a process of consolidation.
HS
