Problems and solutions for smaller asset management middle offices

1. Under Pressure
MIDDLE OFFICE SOLUTIONS FOR
SMALLER ASSET MANAGEMENT FIRMS

2. Middle offices in smaller asset management
firms face growing complexities.
The constant use and systemic importance
of their systems means that any change
risks massive disruption.
TIME FOR CHANGE
But new middle office solutions
are exactly what’s needed...

3. On the one hand the back office function has long
since turned into an outsourced commodity play.
But the middle office is a trickier beast altogether
because it is inextricably linked to the front office and
recognised as a function that requires in-house control.
STILL IN
THE FRAME

4. That’s largely due to exponential changes to the
markets and an explosion in trading instruments
and AUM. A report by PwC states that AUM will
rise to around $101.7 trillion by 2020.
Increased trading volumes also mean the
middle office’s remit has massively expanded,
with PwC saying fundamental change is
needed to cope with the increase in workload
and the way the work is done.
THE MARKETS
NEED YOU

5. Trading volumes are picking up and the complexity
of processing them has increased. For example,
more data tags have to be attached to each trade
and there are tighter data processing timeframes.
Ernst and Young examine this in more detail in their
2014 report; Managing complexity and change
in a new landscape. The report says regulatory
requirements and increased transparency are also
increasing this complication at an exponential rate.
BUT… THE MARKETS
ARE INCREASINGLY
COMPLEX

6. SO, WHAT NEXT?
Despite the challenges, change
is proving to be positive.
Expanding the realm of the middle office has
increased its importance to the business.
Today, the best are finding middle office
solutions to influence and provide strategic
value to the asset manager as a whole.

7. Middle offices in smaller asset management
firms face all of these challenges in the
same way as their larger competitors.
But because they have not historically bought into huge
legacy systems, they are free to take advantage of new
technology that allows a faster and less complicated
processing capability.
MOVE FAST.
STAY NIMBLE.

8. Put simply, smaller asset management firms can be
more nimble and change direction more quickly.
Because they have more flexibility, they can change
systems and processes that are not working and can
see where efficiencies could be made and operations
improved more easily.
The downside to this is that their margin for error is tight
and they need their middle office to perform well and pull
its weight consistently within the business as a whole.
In a small asset management firm
there is nowhere to hide.
PROS AND CONS

9. Agility is an important
competitive advantage...

10. ...but, be ready for a culture change.
New technology also leads to a more open and
collaborative approach to data management.
That’s required because in today’s market there’s a
need to provide strategic insight, as well as solve the
challenges around multiple workflows and processes.
SHARE AND
SHARE ALIKE

11. The data provided by the middle office
can be used to inform overall strategy by
revealing trends and operational patterns
that might otherwise be unidentified. To
achieve this, other facets of the business and
the middle office need to work together to
set out what they want the data to do and
the questions they are hoping it will answer.
SHARE AND
SHARE ALIKE

12. Old legacy systems are often not designed to efficiently
process modern data structures that require a lot of
workarounds to meet requirements.
They are also not being designed to handle scalability
and change, which is exactly what is needed today and
going forward.
This is where new technologies can bring so much more
to the data processing and analytics party.
OUT WITH THE OLD

13. Whereas smaller managers have worked in a more
ad hoc way up until now, technological advances
present an unmissable opportunity to install a
solution that meets the needs of today and adapt
to the unseen needs of the future as well.
This is an important point because more data,
different types of data, the speed at which this
needs to be processed and presented to various
parties, all represent a challenge.
IN WITH THE NEW

14. COOs today are not just looking for operational
efficiencies. They also expect their middle office to
add strategic value delivered through:
“Enhanced analytics - honed, crafted
and providing value-added insight.”
MORE THAN JUST
NUMBER CRUNCHERS

15. The requirement for better processing capability means
asset managers need their middle office more than ever.
For COOs at small to medium tier firms - unhindered by
unwieldy technological legacy - this presents an
opportunity to ‘rightsource’ technology platforms
that are fit for future purpose.
Recent developments now mean there’s a real opportunity
to improve efficiency and turn the best data into a valuable
currency that will help their firms to compete and grow.
LOOK TO THE FUTURE

16. • Front office innovation, trading volumes and
regulations mean there is more to do
• Small managers are nimble but have a smaller
margin of error
• Analytical output needs to be flexible and
delivered to more stakeholders than ever before
• New technologies create workflow efficiencies
and facilitate information sharing
TAKEAWAYS

17. LOOKING FOR
IMPROVEMENT IN
YOUR MIDDLE OFFICE?
Risk and performance analytics 2016-2020 -
The future business case for boutique asset management firms
Review how smaller asset managers are
shaping up their middle offices for the future.
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