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Preparing Efficient Systems for Diversified Asset Classes
What to consider when rationalising the need and requirements for diversifying asset classes in investment offering:
Key Question 3.“Does this system allowme to hold all the asset types our clientswould like to trade, in one database,so as to provide a consistent experience for our clients?”
In a market of persistently low yields, wealth managers are having to move away from their traditional asset allocation and diversify their product offerings into less traditional investment types. As such, some portfolios now consist of increasing real assets, private equity and even some exposures to crypto markets to help deliver those valuable basis points of performance.
However, for most companies, this is causing a key operational risk as their core technology doesn’t natively support these less traditional asset types (I.e. correctly recording the new transaction types / managing the settlement process / appropriately routing orders / setting up new rules for bookkeeping and connecting to data providers that specialise in these asset types etc.).
As a result, they have had to fragment their technology architecture and onboard best-of-breed solutions to handle each new asset class that their clients are demanding. This, in turn, causes many downstream challenges, such as not having an accurate picture of your entire business in one single database and struggling to meet investor and regulatory reporting as a result.
In addition to this, whilst most firms are trying to cut costs, they are faced with ever-increasing IT costs to maintain these expensive integrations between the multiple systems they have acquired over time.
Now more than ever before, it is paramount that your core operating system allows you to adapt to the changing investment landscape. Wealth managers are looking for technology that natively supports both public and private markets in a single database solution across their front, middle and back office. Allowing them to get to market much faster without limitations on new products and not let their IT architecture determine their investable universe.
In a market of persistent low yields, wealth managers are having to move away from their traditional asset allocation and diversify their product offering into less traditional investment types.
