2014 will be the year in which fund administrators shift from cost centers to strategic growth engines by leveraging data, predicts Confluence, a fund administration technology provider.
As fund managers become increasingly global and have more price pressure, administrators can use technology as a differentiator. Old technology has restricted growth, says Confluence, but new systems can make administrators into value-adds for fund managers. Without this differentiator, fund managers would just choose an administrator with the lowest cost.
“It is no longer enough for back offices to merely cut costs. Going forward, the most innovative won’t just reduce—they will produce,” says Confluence chief operating officer Skip Smith said. “They will also apply the lessons the banking industry learned more than a decade ago and find new ways to leverage data and automate to achieve real efficiency and drive growth.
“Savvy fund administrators will realize they sit on a goldmine of data that, if extracted quickly and delivered in a consumable format in real time, can help drive sales growth. They will differentiate themselves with more solutions, quick payoffs and transformative technology. We expect more back offices to automate routine activities and displace prevailing processes such as typesetting, which is currently an outsourced reporting bottleneck. And they will use technology to deliver fact sheets and other data to their middle and front offices faster and more accurately, enabling fund companies to better attract investors and thereby extract real value from the back office.”
This shift will also come about because of fund growth in Europe, predicts Confluence. AIFMD and UCITS will facilitate cross-border distribution of funds, and thus both European and non-European fund administrators have an opportunity to offer new services to help their clients increase distribution. This increased distribution in Europe will lead to improved data management and automation in order to scale up appropriately.
“In recent years, tumultuous financial markets and lower profits have inhibited IT spending among financial services firms,” says Smith. “But the heavily manual processes and spreadsheets still used in many back offices now pose a very real risk of impeding fund companies’ growth by limiting their scalability and exposing them to reputational risk.”
Lastly, Confluence predicts that in 2014, more asset managers will sponsor multiple types of funds and launch them in multiple domiciles. As a result, administrators need technology that can handle all the requirements of different fund types and jurisdictions, and they need to bring everything together. So those with better data harmonization will be the ones who will come out on top in this climate.
Fund Administrators Will Become Strategic Growth Engines, Says Confluence
2014 will be the year in which fund administrators shift from cost centers to strategic growth engines by leveraging data, predicts Confluence, a fund administration technology provider.
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