In recent years, the financial services industry has witnessed significant advancements led by technology to facilitate quicker payments, streamline business operations and allow for seamless cross-border transactions.
This approach has been crucial for asset management firms looking to successfully manage and control their portfolios whilst also setting up new operations in emerging markets. Partnering with global financial institutions have been invaluable in this process, with platforms such as PATRONAS providing the framework for businesses to introduce new management systems and solutions to cover regulatory requirements, while reducing the cost of implementation.
In this article, Bobsguide speaks with Andrea Beste, sales director at PATRONAS, on how regulatory changes enable increased competition and the major challenges ahead for global asset management firms.
What are the main reasons businesses hold back when looking to introduce a new asset management system?
“Based on many discussions with European asset and portfolio managers, the main reason for delaying the introduction of a new AM system is a) the shortage of available IT resources, and b) the fear of disruption of the daily business,” says Beste.
Andrea believes that cost is also a subsequent factor: “Most STP solutions in the market are priced with bigger asset management companies in mind – starting with a large number of users and funds.”
This, in effect, leaves little consideration for SMEs or asset managers looking to start with a small number of asset managers and managed funds. “This leads to a growing demand in solutions offering the possibility to add to the initial IT set-up without major disruption as business develops,” she adds.
“In general, any existing asset management solution tends to be integrated with different third-party solutions covering tailor-made services such as risk management and reporting. There also tends to be numerous connections in place with custodians, legal and accounting counterparties as well as with execution brokers and platforms.
“To have a seamless rollover from one solution to a new one is only possible with careful and time consuming preparation, involving valuable IT resources,” says Beste.
How should businesses overcome challenges around regulatory changes that enforce increased competitiveness?
Businesses understand that the rise of digital-centric solutions will change competitive dynamics, as more organisations move towards streamlined operations and radical digital transformations.
“There’s a growing need to change from manual activities to an electronic management process,” says Beste.
“Regulatory requirements are becoming more demanding and it’s vital to be able to register and store all relevant activities within the application in order to export and report these to the authorities whenever required.
“Especially the smaller and medium sized asset management companies, where Excel- and telephone-based procedures are still widely the norm, see a growing need to introduce an automated process to fulfil existing requirements.”
What are the main drivers of this change, and which areas require greater digitisation?
Beste believes that whilst there’s been significant advances in the last decade in developing asset management systems, there’s still a lot of scope for innovation.
“One of the major challenges for any software developer is the constant need to cover new asset classes and how to handle these within the solution,” he says. “Most newly added assets are OTC instruments, which raises the question of correct pricing and management of the related data and portfolio risk.”
ESG is another topic that is setting new industry standards – “the challenge is to enable the solution to handle ESG related requirements and make sure that the investment compliance module in particular is adapted accordingly.”
Intraoperatively is another key area that Beste believes will be disruptive, with asset management firms having to turn to partnerships with global firms in order to stay competitive.
“There’s also the growing demand for being able to integrate with different counterparties, specialised in particular areas. Given the rising number of requirements from regulatory bodies for efficient portfolio management and constant changes within the markets, it becomes increasingly difficult to offer one solution covering all requirements to the highest standard within one single software product,” she says.
“Many providers believe it’s better to be a market leader in one specific area rather than to offer a ‘one-for-all“ solution with mediocre coverage.”
Do asset management now, more than ever before, require a digital-centric business model to succeed and innovate within the industry?
Andrea believes that growing demand from regulatory bodies, the increase in new assets and complex real time calculations will force asset managers to become more digital and to use electronic solutions in order to stay competitive.
“There will be increased demand for hosted and managed solutions, considering the large number of smaller to medium sized asset management companies, which will be forced to rethink and evaluate their current system infrastructure,” she says.
“PATRONAS and a product like PATRONAS QuickStart will play an important role in this innovation process and we look forward to helping market participants to achieve their goals and to automate their processes.”
How does a product such as PATRONAS QuickStart enable a fully hosted software solution with management of market data in an easy and efficient way?
“PATRONAS QuickStart was introduced with asset management companies in mind, which require a fully automated asset management process without the need for a large inhouse IT department or the requirement for costly contracts with data vendors,” says Beste.
“In addition, being offered as a hosted solution, installation can take place within a very short period (6-8 weeks) and without major disruption of existing workflows. We have taken the decision to continue to strengthen our core features and modules and to work closely with market leaders for functionality.”
She continues: “PATRONAS QuickStart covers all the important steps within the management process of one or numerous portfolios. The solution is asset class independent and all necessary static and market data is delivered within the product scope.
“Setting up the solution will be centralised within the premises of PATRONAS. In addition, PATRONAS will ensure that the system is set-up for the needs of the customer and that users will be provided with front ends mirroring their individual requirements.”
In addition, could you discuss some of the PATRONAS Quickstart features, capabilities, and advantages, and how these provide businesses with an innovative edge?
“PATRONAS QuickStart is a fully-fledged portfolio management solution, covering all steps from powerful and real time portfolio simulation and modelling, sophisticated compliance checks, order management to handling relevant data for the integrated reconciliation process,” adds Beste.
“The platform offers a seamless and fully integrated management process, providing a real time view of all assets held in one or numerous portfolios. One of the most relevant features is surely the Investment Compliance, which was developed in-house to offer a large set of standardised compliance rules. However, using a proprietary programming language offers extreme flexibility in setting up new rules whenever regulation changes and in creating customised rules for each individual customer needs.”
“PATRONAS QuickStart also comes with an integrated interface to FIXhub, one of Europe’s leading electronic order routing networks, offering easy access to +80 international execution brokers and trading platforms for the real time execution of all orders released to market after the relevant compliance checks within PATRONAS QuickStart.”