Thoughts on Top Trends for 2012

January 4, 2012

Now that we’ve officially entered 2012, it seems fitting to take a moment both to reflect on what we’ve observed over the past year and to share our thoughts on the coming year.  Luckily, before the holiday, our friends at FTF published a two-part article discussing the top 10 trends they see for operations in 2012.  You can click here to view Part 1 and Part 2 of the article – note that it requires a login (which is both free and highly recommended). 

The FTF article does an excellent job of explaining the trends they see.  So rather than rehash the content, we wanted to reflect on how these trends apply to PORTIA’s specific space, as some resonate more than others.  Below is our commentary, with links provided to blogs we’ve written in 2011 on these topics should you want to read more.

Industry Trends

In mid-2011, we saw a lot of evidence suggesting that the asset management industry was recovering well from the economic downturn.  For example, this year we posted blogs about opportunity in the Nordics, Middle East and Africa.   While emerging markets appear to be faring better than developed markets, we agree with FTF that everyone is worried about a European debt crisis and slower than expected recoveries in major markets such as the U.S. 

Nevertheless, we are seeing asset managers perform well on a fundamental level.  And one trend that has not slowed is the move towards outsourcing.  We’ve blogged at length about how outsourcing provides more benefits than just cost savings.  We believe that outsourcing could grow ever faster due to global instability.  That is, by using SLAs to shift operational risk to vendors, by having vendors bring world-class capabilities to bear and by shifting to a variable cost structure, outsourcing could be an operating model that provides more flexibility should we see tumult in financial markets.  

Regulatory Trends

FTF asserts that technology spending for the middle-to-back office will increase, in part due to OTC reforms, and we strongly agree.  But in our opinion, OTC is not the only driving factor.  For operations staff, proper data management, performance attribution and ultimately reporting are critical to meeting the information needs of all regulators.  Dodd-Frank, Solvency II, Basel III, UCITS IV, etc. – all of these will have some impact on operational requirements, and for most the impact is still unknown.  So we’d argue that while OTC regulation is imminent relative to other changes, firms should think holistically about how to budget to ensure their operations are flexible enough to meet all future regulatory needs, including but not limited to OTC reform.  Doing this will reduce total cost of ownership

We also agree with FTF that the move towards Legal Entity Identifiers (LEIs) will be the first in a series of moves towards industry standardization that is designed to provide stability unlike in the 2009-10 market downturn.  Corporate actions standardization will also need to be addressed, but this is unlikely for 2012.  In the meantime, corporate actions processing will be handled by middle-to-back office systems such as PORTIA, or manually for those not taking advantage of the automation provided by IT vendors.

Technology Trends

Over the past few years, there has been a lot of chatter about the technology topics addressed in the FTF article.  This year, PORTIA has blogged repeatedly about data management, cloud computing, scalability and more.  Cloud computing was a hot topic with clients and prospects in 2011, and we expect this to become even more prevalent in 2012.  Because PORTIA can be deployed flexibly – as an installed, hosted or fully outsourced solution – we can leverage private cloud capabilities. 

However, we have not seen large asset managers move to public clouds.  Given the tight regulatory nature of our industry, the size of most asset managers and the sensitivity around data, we expect private cloud computing to remain the focus of technology discussions in 2012.  Similarly, we have not explicitly blogged about mobile technologies – in part because our clients and partners are not using mobile in the middle-to-back office yet.  However, we agree with FTF that there is a convergence of technology in the middle-to-back office, and we are fortunate that PORTIA is flexible enough to address a shift to mobile should it occur.

We’d like to wish our blog readers a prosperous 2012, and we look forward to continuing to engage with you online throughout the year.  In the meantime, we welcome your comments on the trends above – what are you observing and what is pressing for your firm/clients in 2012?

– Matt Bellias, Director of Strategy and Marketing

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