The wait and see period is over for fund administrators who have weathered the storm of the crisis, says Oded Weiss, CEO of Multifonds (the rebranded IGEFI single-platform software provider), who believes technology and efficiency will be paramount in 2011
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GC: Where do fund administrators stand now that the worst of the crisis is apparently over?
Weiss: We think 2011 is going to be an interesting year. The wait and see strategy that many of the administrators and managers took in the past few years is no longer going to work. People will have to make some real decisions. We see many of the managers recoveringwhile profits were down 50% at one point, a lot of it is coming back. But theres still a way to go. And theyre expecting the administrators to act as decisive operators that create operating leverage and are improving efficiency. This is no longer a point in time decision and then we live happily ever after. This is a partnership where the administrators need to prove to the managers that they are going to get better efficiency and better ratios over the years. And thats not easy to do.
GC: How do administrators measure whether or not they are efficient?
Weiss: Efficiency ratios are not always easy to measure because it varies by the book of business you have and also how you measure it. Some of our clients have [a ratio] of 8 funds to [each] accountant, and some of them 15. Whats important is to start to make decisions in order to change the ratios. Just looking at ratios is not making a difference. The people that are focusing on constant [change] in the back office and middle office environment, they can actually see the results very quickly.
GC: Having weathered the storm of the crisis, do you expect administrators to begin ramping up spending on things like technology?
Weiss: In technology, we all like new features and new architecture and sometimes many of the technology providers together with the IT departments spend a lot of time on features and details, but in a way [they cant see the wood] for the trees. Its important and its our responsibility to focus the business back on the outcome and what each platform will provide and how its really going to help the business be successful.
Now clearly there [are] some legacy infrastructure constraints in mature markets for mature players. But the good news [is] that new technology like Web services, new database architecture, make implementation [a] much easier, cheaper, faster exercise. And until you actually move to new platforms its very hard, even impossible, to make a truly step change improvement in your efficiency in the back office.
GC: What else should fund administrators look out for in 2011?
Weiss: We see a perfect storm coming in the back and middle office in third-party administration. The combination of all the new regulatory demands plus the expansion to new markets, the pressure to continue and grow the business and convergence of asset classes [are all] creating tremendous pressure on operations. And only if you are focusing on efficiency and having the right solutions in place [can you] do well in such an environment.
-Christopher Gohlke