BlackRock and Vanguard discuss the future of operations teams within asset managers

Asset managers are looking to train their teams across the front-, middle- and back-office in order to give them a full end-to-end picture of the investment process.

By Jonathan Watkins

Investment operations could displace the front-office in becoming the battleground for asset managers as the importance of the middle- and back-office grows, according to a senior Vanguard executive.

Speaking alongside BlackRock’s global investment operations strategy and industry engagement, the pair from the world’s two largest asset managers discussed the future of investment operations divisions at InvestOps Europe.

“In this environment the impact of operations is getting more important,” said James Kearney, head of global investment operations at Vanguard. “I really hope that starting in 2020 this is the decade where operations becomes sexy.

“Investment managers have found all the alpha they could find, this is the battleground where you are going to be able to make things better.”

The comments concluded a conversation where the importance of data, innovation and being agile were discussed among investment operations executives.

Meanwhile, his counterpart at BlackRock highlighted how the world’s largest asset manager is looking to train its team across the front-, middle- and back-office in order to give its team a full end-to-end picture of the investment process.

“There’s going to be fewer ditch diggers and more cathedral builders,” said Lou Rosato, global investment operations strategy and industry engagement at BlackRock.

“The simple thing to do – which we do – is rotate people into different roles. We’re very proud that we have high performers that go across these different activities and functions.

“The traditional path would be going into trading or client facing activities, and actually recently we have gone the other way and have brought people from trading and client facing into operations. We are moulding together all of the skillsets, so they can see the full picture with an end-to-end view. If we’re not end-to-end in the way we think we’re stuck.”

The comments followed a story from Global Custodian yesterday which highlighted how asset management operations teams are facing up to a new era of automation and technology innovations by changing their recruitment patterns, according to a panel, where one speaker claimed “the operational specialist is a dying breed”.

Certainly in my organisation, the classic operational specialist is a dying breed,” said Jordan O’Neill, head of operations and treasury, Aspect Capital. “If I look at my team they are more business analysts and process engineers, they need to be able to sit and talk with the technologists. What we’ve seen work best is whereby the business user and developer are away in a room.

“We tend to not hire too many operational specialists these days, we look more for generalists with broader skill sets who can lend their hand well to taking a process and condensing it down.”

With technology and data becoming such essential components in the investment operations processes at asset management firms, being able to understand the business alongside the technology is becoming crucial.

Discussing the relationship between the front- and, middle- back-office, Arnaud Zeitoun global head of transformation at BNP Paribas Asset Management, also said the firm was looking to enhance the relationship between the two teams.

“What we’re trying to do is change the relationship between the back/middle and front,” he said. “There used to be that whatever the front wanted they get, but the more you dig into that you see the issues it causes throughout the organisation.

“The more you can reverse the relationship and have ops teams lead the framework in which the front-office can function smoothly is very efficient.”