Asset managers are focusing their attention on their entire value chain
Buy-side companies with strong growth ambitions face many challenges. Ever-changing regulations, digitisation, cost pressure as well as a challenging and competitive market environment are just a few examples.
These growing constraints use precious corporate resources, be they time-related, human or financial. In order to streamline and strategically (re)allocate them, investment professionals have to rethink their operating model if they want to focus on what really matters: investing and generating financial performance. To achieve this, outsourcing non-core activities to expert service providers may be a winning strategy.
Opening up the scope of possibilities
The need for asset managers to focus on investment and optimise their operational processes has resulted in a deconstruction of the value chain, each link representing a potential outsourcing opportunity.
As mentioned by Yoan Chazal in his article, back- and middle-office activitieshave been successfully outsourced by many asset managers for several years and new possibilities are emerging, especially when it comes to front-office and some of the portfolio managers’ traditional tasks. These new outsourcing capabilities, and those that are likely to emerge, give asset managers extra opportunities to focus on their core business by delegating lesser value-added tasks to outside service providers. After all, efficient investment strategies generating alpha remain key differentiation factors in a highly competitive environment.
However, calling on specific “outsourcees” for each identified link of the operational chain can be a hurdle to the outsourcing decision, as the expanding scope of activities may make steering operations more complicated. With a diversity of representatives and the need to monitor each relationship, daily management can easily become a burden. Concentrating outsourced services around a single provider could therefore be the solution, with a single point of entry regardless of the request.
Open architecture: A key to successful outsourcing
Asset managers often have to establish specific processes for their key clients who are notably liable to impose their custodians and fund administrators. They consequently need to remain flexible if they want to seize business opportunities as they come up. As a result, if they choose to outsource all or parts of their front-to-back operating chain, they must make sure their service provider is as flexible as they ought to be.
In the financial world, open architecture defines a financial institution’s ability to offer clients both proprietary and external products and services. Open architecture therefore ensures that a client can satisfy all their needs and that the institution can act in each client’s best interests. Considering front-to-back outsourcing and asset managers’ most-needed flexibility, open architecture is thus an obvious must-have for an investment professional when selecting a potential outsourcee; especially when clients have specific requirements such as their custodian or fund administrator of choice.
CROSSWISE: Transforming the complex to the simple
As a major international bank and asset servicer, the Societe Generale group is well aware of professional investors’ concerns. With these in mind, synergies have been established across its various business units to help buy-side companies overcome their challenges.
CrossWise is the result of this process. It is a modular one-stop-shop front-to-back outsourcing solution combining a cutting-edge portfolio management system (SimCorp Dimension) with the full support of SGSS’ middle- and back-office teams. SGSS operates in open architecture and has formed ties with all the investment industry’s major players to ensure flexibility. As a service provider, SGSS thus has the ability to intervene along the entire value chain in order to provide a single point of entry and to allow the implementation of a modulable outsourcing plan, insofar as CrossWise add-on modules (front office, dealing & execution, middle and back office) can be subscribed to separately or together.
CrossWise’s outsourced dealing desk (I-DEAL) is a good example. It gives asset managers access to 90+ brokers and counterparties, they are free to choose from and to which they can delegate execution or not, depending on the asset class. In addition, SGSS’ partnership with SimCorp guarantees access to front- and middle-office integrated digital tools whose technical and regulatory features are continuously updated. Assisted by SGSS, asset managers of all sizes can now leverage these powerful tools.
Léonard began his professional career at a Parisian GCM (Global Clearing Member) as Operations and Steering Client Relations Manager. After 10 years of experience in consultancy at SBT Human(s) Matter, Leonard Ollier joined SGSS in 2015. He is now in charge of developing business solutions for Asset Managers. Léonard is a graduate of the ESCEM school of business and management.