Future proofing the business model

As part of an entrepreneurial culture at Muzinich & Co, Ersilia Molnar, chief operating officer, is finding technological opportunities to future proof the business through automation, data and front-to-back integration.

By Jon Watkins

What do you see as the top transformational trends shaping investment operations?

Lower margins, fee pressures and heightened regulations are putting increased constraints on asset managers globally. As a result, managers are utilising technology to improve efficiencies across their businesses. 

We are also seeing increasing competitiveness and consolidation as managers focus on costs and economies of scale, highlighted by this year’s high-profile acquisition of a financial data firm [eFront] by one of the world’s largest asset managers [BlackRock].

With technological advancements comes the increasing use of artificial intelligence (AI) which is being integrated to create more robust processes and mitigate risk. The growth and development of niche products, illiquid strategies and hybrid solutions are also now becoming integrated into systems from an operational standpoint. 

As a firm at the smaller end of the scale, we are focusing on strengthening and enhancing our infrastructure systems to automate processes and future proof our business model as investor and regulatory demands grow. 

New technologies have been a discussion point for a number of years now, where are you seeing the most progress and potential?

The growth of technology is shaping the way we work to be faster, smarter and more efficient. Systems are becoming integrated across front-, middle- and back-office functions, creating end-to-end solutions from portfolio management, trading and order management through to reporting, accounting and information technology. The better the tools, the less time it takes to execute.  

While data analytics was initially focused on equities markets, it is being increasingly used in fixed income. One of the key areas where we are seeing the most progress is in the integration of data analytics into news sources and portfolio and risk management tools. 

As a smaller organisation we do not have our own in-house systems but work very closely with our vendors and service providers. This has proved to be mutually beneficial to both parties as we partner with them in the development of credit-specific systems and software as well as those focused on increasingly important factors such as ESG.

How can operations support any changes in trading strategies quickly and efficiently allowing for best investment decisions?

The advancement of new technologies and systems is increasing the speed of transactions and AI is being used on the initial screening of instruments across different investment universes. 

The development of algorithmic trading strategies and predictive analytics tools and their use to implement investment decisions is growing but is still a relatively small segment of the market. We are using technology to complement our processes and are implementing new systems covering front-, middle- and back-office. However, we continue to utilise these systems to enhance and complement our focus on bottom-up fundamental analysis, rather than as a replacement. 

More broadly, we have seen investment and trading strategies benefit from improvements in operational areas such as ESG data aggregators which are providing better and more comprehensive information.

A key area of development and improvement in operating systems that we would like to see is how well data is visually presented. The better the display, the faster that information can be digested, thus contributing to better investment decision making. 

All areas of asset management are also benefiting from improvement in cyber security, and the use of AI in protecting data. 

What strategies have you enforced to create a culture of innovation within your team and how have they responded?

We have a very innovative, inclusive and entrepreneurial culture as a firm. The implementation of new systems is only helping to enhance how our teams work, internally and externally. The size of our organisation means we can be very nimble in our operations and fast to act both in terms of setting up new products and solutions for our clients as well as troubleshooting and mitigating risk.

How is technology changing the way your internal teams function and their day-to-day jobs?

As a smaller organisation, everyone is very hands on because we are so streamlined. The implementation of new technologies is improving the quality of our data, speeding up processes and reducing risks. New technologies are enabling us to do a better job at implementing new strategies and embedding processes.