Forty-eight percent of front-office decision makers at buy-side investment management firms in a recent survey said they spent more than 15% of resources on manual processes in the front office.
For participants in this category, average performance ratings were lower in every case, indicating that a high degree of manual processes was commensurate with lower investment performance.
Asset management software provider SimCorp conducted the survey in December and January with firms managing a minimum of $5 billion. Respondents included chief investment officers or directors of investment management, as well as heads of a function, such as trading, or an asset class.
Only a quarter of those surveyed said they were confident that their front-office IT systems could automatically integrate data from external sources.
SimCorp noted that data originating from outside the front office, such as risk and performance metrics, corporate actions and collateral levels, were all critical to timely investment decision making and providing a complete and accurate picture of positions.
Eighteen percent of respondents said their ability to generate and view intraday positions was inadequate.
The survey found that this was further backed by 24% of respondents who said they felt uncertain about their system’s ability to support new market entry and 21% who had doubts about supporting new asset classes.
These factors, SimCorp said, were increasingly important at a time when multiple studies have shown that incremental fee growth is likely to be generated by “non-traditional” asset classes.
In addition, 37% of front-office professionals said they were not entirely confident in their firm’s ability to comply with the regulatory burden that has materialized since the end of the financial crisis.
“In many cases, manual workarounds have been developed as a patchwork solution to aging legacy infrastructure at investment management firms,” SimCorp’s chief executive Klaus Holse said in a statement.
“These will struggle to provide the front office with a full and timely overview of their risk without moving to an integrated solution, which allows them to compete effectively.”
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