Paradigm Shift – The Cloud’s Role in Asset Management

whitepaper

In the last decade, the role of asset managers has broadened and taken on new risk management and compliance requirements. At the same time, however, the same asset managers and wealth managers continue to use the same technology to manage their business. In addition to older client/server portfolio accounting software packages that are integrated with internal custom and multiple third-party applications, including spreadsheets, these firms are also coping with shrinking budgets. As the operating environment has evolved, and competition has increased for new assets, managers are now focusing on reviewing their entire business to gain an edge.

Asset managers in these turbulent times are looking closely at the technology options that are available to increase operational efficiencies and control costs. They also have concerns regarding security, transparency and compliance. They seek to balance new benefits with risk. They also want to impress new investors.

This whitepaper explores the asset manager’s technology conundrum and makes the case for a web-based, integrated cloud solution – with enterprise-grade security and compliance characteristics – as a driver of greater effectiveness for risk management while enabling the asset manager to operate efficiently.

The Evolution of Asset ManagersConsultancy group PwC has predicted that global assets under management will pass the $100 trillion (£61 trillion) mark by 2020, up from $64 trillion (£40 trillion) in 2012. In order to capture a greater share of this fortune, asset managers must be focused on delivering financial results, while being fully transparent over fees and costs.

‘Amid unprecedented economic turmoil and regulatory change, most asset managers have not had time to bring the future into focus. But the industry stands on the precipice of a number of fundamental shifts that will shape the future of the asset management industry,’ said Rob Mellor, a partner at PwC.

As a result, asset managers are beginning to deploy web-based cloud solutions and retire the client/server software that ruled the 1990s. Today we are familiar with some of the complexities around these systems – old technology, multiple integration points, limited capacity and scale and limited flexibility to name a few. The industry is under closer review from a processing standpoint as well, with operations audits and certifications such as SAE16 becoming an issue, especially with institutional investors. With the level of managerial due diligence increasing, as well as ever-changing regulatory requirements, the need for a responsive cloud-based solution is evolving. Asset managers must also improve their internal processes. They must find ways to leverage expertise with fewer resources, gain operational efficiencies and improve collaboration with geographically and virtual team members.

The good news is moving off a software platform to a Cloud-based solution has generally saved asset management firms more than 20 percent in costs, reduced operational risk significantly and provided cleaner audit streams.

With the level of managerial due diligence increasing, as well as ever-changing regulatory requirements, the need for a responsive cloud-based solution is evolving.

CHIEF INVESTMENT OFFICER

CHIEF FINANCIAL OFFICER

CHIEF INFORMATION OFFICER

CHIEF RISK/COMPLIANCE OFFICER

Portfolio Manager Finance Technology

Portfolio ManagementFinance

TechnologyRisk/Compliance

Paradigm Shift – The Cloud’s Role in Asset Management  |  2SS&C Technologies, Inc.

The Next Generation – Cloud-based SoftwareUltimately, not all cloud-based software is created equal, especially when it comes to security, control and functionality, and the experience of the service provider. The disproportionate ratio between increased competition and transparency and smaller budgets and less staff makes it paramount that asset managers have fast and efficient access to critical investment data, and the ability to protect, control and audit it at a moment’s notice.

Cloud-based software provides customers with software, services and content over the Internet by way of shared computing resources located in secure and centralized data centers. For asset managers, the shift to the cloud is driven by these benefits:

• A highly secure, compliant and auditable investment management solution

• Improve ability to scale infrastructure

• Lower commitment of in-house IT staff and related resources

• Leveraging the bring your own device (BYOD) trend but with added security and compliance

• Faster deployment speed

There are several established providers of leading edge technology solutions with products that harness such advances and deliver quantifiable benefits. These providers combine software with services. Just as important is the service component. Not only do managers upgrade the technology and achieve cost savings and operational efficiencies, they gain access to key expertise. The provider is an ever-available consultative “resource” on the industry, including evolving and intrusive regulatory requirements.

For investment managers cloud-based solutions have the following specific features:

• They are Internet-based, enabling the buyer to move off costly internal infrastructure and realize savings. These solutions have evolved and are secure, transparent and provide instant access to actionable data.

• Cloud-based solutions are the future of the industry – these solutions dispel many myths regarding Internet risk. This is where the industry is going – in fact where all industries are going.

• Outsourcing technology is an operational hedge – it isn’t just a cost savings and modernization program. By moving to a SAAS model you enlist the experts at the provider, and they have the staff and firepower to realize economies of scale. They employ the best practices of the industry. They have many clients like you and are always learning. They maintain the hardware and maintain the software.

• Full STP – these new solutions plug into your trading system and take the process the rest of the way, through transaction processing, reconciliation with counter-parties, portfolio management, performance, billing and internal and external reporting. All under one secure cloud-based mantle.

• Investors look for SSAE No. 16 examinations now – institutional investors are rushing to safety in the wake of unprecedented industry shocks. This trend is going to continue and managers who can provide a modern, certified hosting solution will have a distinct competitive advantage.

Cloud-based software provides customers with software, services and content over the Internet by way of shared computing resources located in secure and centralized data centers.

Paradigm Shift – The Cloud’s Role in Asset Management  |  3SS&C Technologies, Inc.

• Business continuity solutions are often bundled with co-location options. If a disaster occurs you will have fewer phone calls to make concerning your operating environment.

• Can be bundled with infrastructure hosting (email, MS, etc.) – Some providers can host your entire technical infrastructure. They have audited, certified data centers supported with on-site power energy sources. Again – limiting the number or vendors and phone calls you need to make reduces pressure on management and executives.

• Flexible – solutions can be “components” in today’s world. Managers can pick and choose components of the overall solution. They can grow into the comprehensive solution over time.

• Solutions are robust – they are not web shells – they offer:

• Integration to trading systems

• Account management and contact management – with integration to third-party product providers (re-sale)

• Pre-post trade and passive compliance

• Full multi-currency portfolio accounting

• Automated reconciliation featuring case management and exception based operations

• Fee billing

• Robust management and client reporting

• Links to counterparties – including data vendors

Analytics Portfolio Management

Trading & Compliance

Investment Risk

Client Reporting Compliance Data Feeds / Normalization

Performance Measurement & Attribution

BACK OFFICE

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FRONT OFFICE

Settlement & Reconciliation

Corporate ActionsAccountingPost-trade

Compliance & Regulations

ENTERPRISE Data ManagementArchitecture Derivatives Operational Risk

Secure. Controlled. Compliant. Auditable.

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OBILITY ACCESS

Paradigm Shift – The Cloud’s Role in Asset Management  |  4SS&C Technologies, Inc.

SummaryWealth managers and traditional asset managers exist in a competitive, continually changing environment. Investors have many options. Competition for assets remains intense, and alternative asset managers continue to grow in market share. Technology continues its advance, and the world is moving towards a web-based model, which is becoming more robust and secure every day.

If asset managers wish to gain a competitive edge, they are going to need to evaluate a cloud-based solution. Analysts estimate that more than fifty percent of managers will migrate to a web-sourced cloud solution over the next five years. There are providers who have traditionally sold client/server software trying to make the shift now into the Cloud. The transition can be fraught with trial and error. Most asset managers can’t take the risk.

As you evaluate your firm’s technology landscape and consider service providers, here are some questions and tips:

• There are vendors who have an extensive history providing cloud-based solutions, and some who arrived late to the party. The vendors who have a long track record should warrant close consideration.

• A truly integrated and robust suite is preferred over a “linked” set of formerly client/server now “hosted” solution.

• Look for automation points – how does this solution work with my trading application? Does it have a powerful integrated reconciliation engine to quickly sort out breaks? Is data integrity an issue can I trust the accounting data for performance measurement calculations?

• How is the reporting – both for management and client needs?

• How much can I bundle with one vendor (software/service/business continuity) and have one relationship I can leverage both for price and service levels?

SS&C is one of the largest providers of outsourced accounting and operations support in the world, with over half a trillion dollars in assets under administration. SS&C provides the asset management industry with over 70 niche-based software products, and has recognized industry SAAS expertise with software hosted/serviced out of world class SAE16 certified data centers.

Technology continues its advance, and the world is moving towards a web-based model, which is becoming more robust and secure every day.

© 2014 SS&C Technologies Holdings, Inc.

SS&C Technologies  |  80 Lamberton Road Windsor, CT 06095 USA   t: +1-800-234-0556  |  +1-860-298-4500  |  solution@sscinc.com  |  www.ssctech.com