Trends in Investment Operations

Author: Eliana Boyd, Liqueo Senior Consultant. 

Traditionally, Investment Operations has been centered around processing transactions and referential data. As systems and asset classes evolve, the need for a dedicated support function has evolved with it. In this article, I highlight three focal points that deserve more attention, and look at how these trends impact the industry. They are: a shift to cloud-based systems, predictive analytics and offloading core operational work to service providers.

Shift to cloud-based systems 

The investment industry is shifting to cloud-based system solutions. With that shift comes an emphasis on data management and governance.  Staff can now centralise all data and tap into it without any need to translate and re-format data via excel manipulation. This allows the function to not only work faster but also smarter. Once this is understood, it leads inevitably to next point below. 

Predictive Data Analytics

The trend towards a more predictive data environment in investment operations, results in an increased focus on investment data optimisation to achieve the strategies and goals of the portfolios being managed. Staff can use tools and models to forecast investment scenarios, what-if analysis, staffing trends, portfolio trends and metrics - all centered around the data at hand. The how-to of predictive data analytics would be specific to the firm.

Offloading core operational work to service providers

Offloading core operational tasks to service providers can yield cost efficiencies based on economies of scale. Not all businesses choose to contract managed services, as it needs to make sense to their bottom line. However, there is a shift in perspective towards a leaner operating model, separating core processing functions from the analytical daily management of assets in a portfolio and movements in portfolio activity. Managing referential data and unstructured/structured data can be bottom line agnostic. So these tasks are good candidates to tap into a shared-services model. This results in leaving the Operations team free to focus on their own operations while having a support model for back-office tasks. 

Summary

As the market reacts and begins to move towards an ever-evolving operating model, it is also important to appreciate the evolution of Investment Operations. Once there was a requirement to have back-office processing and disparate data - across files and then ultimately across systems. But now, there is a change coming. The industry is shifting towards a new norm. To stay competitive and not fall behind, a sense check of the existing operating model is essential.