With the current state of the global economy, institutional managers are facing increased pressure to reduce costs, offer greater client service, and diversify their offerings. On top of these trends, more clients are rapidly expecting management systems to be accurate with always on accessibility, which has been further fueled by the pandemic. Investors are also branching into alternative markets, which creates more complex assets to manage, and there is continuous pressure for institutional managers to scale.
In order to successfully navigate 2022 and thrive, institutional managers must make some critical process changes. Here’s what you can do to mitigate these challenges.
As assets grow more complex and require more advanced management and reporting, institutional managers need to retire their outdated systems. While they worked well in the past, many legacy systems now cost managers too much time and money to maintain. Additionally, they are often clunky and unorganized, with data spread out over several databases and processed in different ways. This leads to more manpower required from internal teams (resulting in higher costs), and the turnaround time for updated reports is too slow to support quick decisions regarding investment opportunities and risk assessments. Institutional managers must increase back-office efficiency with streamlined digital systems that provide them, and their clients, with better reconciliation and reporting tools. If implemented properly, this type of solution can reduce back-office spending and free up resources to be reallocated toward client service and scaling efforts.
While digital systems are more efficient than the manual legacy systems of the past, creating these in-house can put a strain on the company that can be felt throughout the entire organization. This is where strategic partnerships with third party SaaS solutions come into play. According to a recent analysis done by Expand, a BCG company, “The Sisyphean Challenge: Achieving Ever-Greater Operational Scale and Efficiency Through Strategic Partnering,” firms that partnered with vendors were able to grow their asset bases faster and reduce their operational costs more effectively.
In other words, they could “do more with less” because they were able to pass on some of their investment data management responsibilities to third-party solutions who specialize in building scalable and continuously improving systems. However, some institutional managers worry that partnering with an external solution provider may restrict their operational agility if the vendor is not full featured enough to meet their needs.
So, how do institutional managers execute and maintain a strategic partnership that actually delivers what they need and what their clients want? One solution is “smart sourcing.” With this model, institutional managers choose to outsource parts of their workstreams but not their entire operations. How much of a firm’s back-office processes can efficiently be offloaded to a third-party partner depends entirely on each manager, their clients, and the asset classes they work with.
To learn more about Expand’s findings, check out this webinar, which dives into the information detailed in the report.
According to “The Sisyphean Challenge,” The main functions institutional managers are currently outsourcing to third-party partners are commoditized back-office operations, such as portfolio administration, accounting, and pricing. Additionally, with operations teams servicing increasingly more complex assets, partnering with external options has become even more of a necessity when it comes to streamlining operations. This is because alternative asset ventures often require nuanced regulations, unique asset handling procedures, and specialized accounting processes, as well as managing and reconciling unfamiliar data types. Working with third parties who have the systems and understanding to manage these complexities can greatly streamline these operations. It is not surprising, then, that institutional managers with no externalized partnerships are increasingly rare in today’s market.
Clearwater Analytics is a SaaS solution that specializes in streamlining back- and middle-office functions like data aggregation, reconciliation, accounting, and reporting. Clearwater automates these processes using best-in-class technology like AI and ML and delivers daily updated reports to clients on its state-of-the-art, single-instance, multi-tenant platform. Institutional managers that partner with Clearwater have access to Clearwater’s data-driven analytics for use by both their internal teams and their clients without manually putting in the hours needed to acquire and process that data themselves. Clearwater’s customizable dashboard offers accounting, performance, compliance, and risk tracking. These options enable institutional managers to choose which reports are most important to them and even build their own. With a few clicks, managers have access to all the investment data they need for an entire portfolio.
By implementing these critical continuous improvement moves into their 2022 gameplans, institutional managers can set themselves (and their clients) up for success. Shifting to the cloud and building strategic partnerships are key to boosting efficiency and streamlining operations. To see how Clearwater Analytics can help you do just that, reach out to an expert today.