global growth

2015 started with considerable market uncertainty caused in part by falling oil prices, instability in the euro zone and reduced growth forecasts for key economies such as China. Jittery investors are taking a far greater interest in their investments, and regulatory pressure continues to pile on buy-side firms. Here are three operational tips that we believe will help the buy-side respond to external demand for transparency and build on successful gains achieved in 2014.

  1. Make data a strategic tool.  Employ strategies that protect the integrity and harness the value of investment data. In many financial organizations, data is scattered in fragmented systems.  As a result, bringing the data together to acquire a complete understanding of a client’s portfolio is a giant production.  A robust approach to unifying disparate streams of data will enable faster, better decisions which produce better outcomes.
  2. Put performance measurement and attribution in context. External investors and regulators want to extract insight. Internal investment managers need to understand which strategies are working – and – more importantly why they are working to secure future returns.    Leveraging performance analytics can turn data into knowledge so that investment managers can understand and communicate sources of risk and return.
  3. Prepare to make data available anytime, anywhere and on any device. Investors expect to be able to see and understand the real-time details of their holdings anytime they want.  To meet this demand, investment management firms need to ensure data integrity and to prepare the data for transport to online portals and mobile devices.  This allows stakeholders to view complex real-time data, provided with the necessary context, whenever they wish.

This year buy-side firms will not only need strong investment strategies that hedge against market uncertainty and exploit opportunity, but also the operational infrastructure to respond instantly to market forces and meet investor demand for transparency.  For those who align their operations around preserving and harnessing the value of their data, 2015 could be a watershed year.

By Julian Webb


Intl MoneyYou probably know why your firm should be GIPS compliant (check out our whitepaper “Six Things You Need To Know About Composite Management and GIPS” on the topic) but even if you are on board, there is a good chance that you are violating GIPS standards unknowingly. We recently attended the GIPS Standard annual conference where verifier Karyn D. Vincent of ACA Performance Services, LLC gave a presentation on common errors she sees when assessing GIPS compliance. For those of you who don’t have the time to watch her full presentation, we distilled three key areas where your compliance may be falling through the cracks.

1. Vague Definitions and Policies

Often firms understand what GIPS policies must be met and adhere to them, but do not document procedures for maintaining compliance. It is vital for investment managers to specify not only what policies they have in place, but each step necessary to achieve it.

Another area that firms struggle with is clearly defining their mandate in their clients’ investment management agreement. This is especially important if your firm manages multiple, similar composites. Often firms will list a non-specific investment policy statement as their investment guidelines but if the agreement doesn’t define mandate, it’s hard to prove you have selected the right composites.

Once you have a clear documentation of mandate and place an account in a certain composite, it should stay there. Having a complicated inclusion and exclusion policy can confuse a tactical move with a change in mandate. Unless your client directs you to substantially change the strategy of their portfolio or this is a composite redefinition, changes to their account should not affect composite inclusion.

2. Lack of Communication

Your firm must make every effort to deliver a GIPS-compliant presentation to all clients and prospects. Many firms are diligent in drafting compliant reports but then do not distribute them appropriately. These presentations should go out on a yearly basis to all clients of a current strategy, clients who are interested in a new strategy, consultants, and prospects. It is up to you to define what constitutes a prospective client, but you must define and document it. It’s also key to track this information as you are likely to be questioned on your distribution by regulators.

Likewise, you should have documented policies and procedures on what constitutes a material error in a presentation and how to communicate that error to clients.

3. Inconsistent Return Calculations

To present accurate returns, you must calculate net of trading expenses for the period. One area where this is a problem is in deducting commissions. You may think that account commissions are being automatically deducted, but sometimes this isn’t the case. Returns on dual contract accounts and new custodian/brokerage accounts often are not paying typical commissions and therefore being calculated incorrectly. Check with your traders to ensure you are aware of these exceptions.

Withholding taxes can also be a point of confusion in calculating returns. Taxes are either reclaimable or non-reclaimable and while your return calculations are probably net of non-reclaimable taxes, you need to consider whether to deduct reclaimable taxes. If you are unsure of whether these taxes can actually be reclaimed, you should not accrue for them.

Lastly, ensure that if you are using model fees to calculate returns, these fees do not generate higher returns than if you had used actual fees. That means you should use the highest management fee incurred by portfolios in the composite or highest fee applicable to each specific client or prospect and test to prove that returns are not overstated.


silhouettes-86239_640As the outsourcing industry matures, more asset managers than ever are seeking to outsource to provide strategic advantages. According to a recent “Middle and Back Office Outsourcing” study published by BNP Paribas, “outsourcing of middle and back office functions is an extremely common practice, with the vast majority of respondents (86%) indicating that they outsource these in part.”   So how are firms outsourcing strategically?

Most commonly, asset managers are outsourcing middle-to-back office functions to focus resources on their core expertise. A well-designed outsourcing partnership can automate and monitor middle-to-back office responsibilities, freeing up resources for priority items while improving efficiency and reliability.  The role of the operations staff can then evolve, letting go of non-core activities to adopt a more focused approach of supporting the firm’s core task of managing money.  Of the fifty financial services firms surveyed by BNP, the “vast majority (78%) indicate they see outsourcing as a long-term strategy designed to help the outsourcer focus on their area of expertise.”

Another strategic driver for outsourcing is to provide protection against market and regulatory changes. Outsourcing redistributes the risks and costs associated with middle-to-back office functions to vendors, which is especially important in today’s constantly evolving market conditions.  Not only is an outsourcer responsible for the service being outsourced, but also for staying abreast of requirements that would impact services.  Implementing an outsourcing relationship that assigns this responsibility to experts protects your firm against costly oversights and gives your investors assurance that you are meeting industry requirements.  According to BNP’s survey, distributing risk is the second-most common reasons for firms to establish outsourcing relationships.

Working with outsourcing vendors typically provides a third, important benefit – delivering services at a lower cost. Outsourcing providers have the economies of scale and expertise to provide quality services with fewer resources, and outsourcing providers who leverage their own technology have even more flexibility to customize solutions to meet each firm’s unique operational requirements.

With the availability of outsourcing to optimize your processes, it is time to consider whether your operational strategy needs updating. Is your firm wasting too many resources on inefficient non-core functions?  Download SS&C’s recent paper, “Beyond Hosting,” to evaluate how outsourcing can provide your firm with an opportunity to create a more effective operational model.



Spreadsheets are powerful tools that enable users to easily customize their own data analyses around a wide range of business applications.   Traders can calculate the risk against their holdings to determine the best investment decisions and then adapt their risk models to account for market changes.  Financial position data stored in spreadsheets allows the back office to perform end-of-day, post-trade reconciliations; easy reports can be created against this to prepare the front office for the start of the next day.  Analysts don’t have to learn complicated coding languages to create their own financial models and spreadsheets give users access to all of their data in an easily-manipulated format.

Until you miss one keystroke.

In 2012, JPMorgan’s Chief Investment Officer was relying on spreadsheets to calculate the Value at Risk (VaR) of their portfolio.  In a spreadsheet, the modeler accidentally divided by a sum where he needed the average, producing a risk assumption that lowered the VaR by a factor of two.  JPMorgan took advantage of this low risk environment and increased investments substantially, known as the outsized “London Whale” trades.  By the time the error was caught, JPMorgan had amassed a loss of $6.2 billion.

Spreadsheets can be a useful tool, but only when used wisely.  Ray Panko, a professor of IT management and leading authority on spreadsheet practices, released a report citing that 88% of all spreadsheets contain errors.  He notes that “these error rates, furthermore, are completely consistent with error rates found in other human activities.” No matter how careful we try to be, it is simply in our nature to make mistakes.  Are you willing to base critical business decisions off of calculations that will be inaccurate nearly nine out of ten times?

Bad data causes numerous problems.  Management relies on data to make key decisions that impact their firm, and human error that impacts data quality can create major complications.  For example, Fidelity’s Magellan Fund overstated earnings by close to $2.5 billion due to an omitted minus sign in a flawed spreadsheet. With the higher earnings data in mind, the fund’s portfolio managers made the decision to publically announce dividends of $4.32 per share.  When the error was caught, they were no longer able to pay out the promised dividends.

Poor decisions due to spreadsheet errors can also impact client and investor confidence; after the UK outsourcing specialist firm Mouchel found a spreadsheet error that reduced full-year profits by more than £8.5 million, their stock price fell by a third.  Outsourcing processes will not insulate your organization from this form of risk; the chief executive of Mouchel had to resign amidst the controversy despite the error occurring at an outside actuarial firm.

Beyond data issues, operations teams that rely on manual processes supported by spreadsheets may be limiting their ability to flexibly grow.  Firms that rely on manual processes are often unable to react to changing market conditions.  For example, investment professionals who rely on custom reporting to make informed decisions can be severely impacted should manual processes fail to produce information in a timely manner.  In addition, firms that manage operations on multiple spreadsheets typically rely on individuals to interpret data, creating dependencies on staff and opportunities for errors.  In today’s tightening regulatory environment, manual processes powered by spreadsheets are often scrutinized by regulators as they are likely to cause compliance breaches.  Sound operational processes that can accommodate growth must not require large projects to adapt to changing market conditions and investment requirements, but rather support change in a controlled manner to ensure quality throughout operations.

The only way to ensure that your decisions are based on reliable data is to minimize manual intervention as much as possible.  For asset managers, a middle-to-back-office solution that automates business-critical functions reduces operational risk by executing the processes that would normally be performed by operations staff.  Automation removes the human variable and frees up your organization to focus resources on functions that support your core mission of managing money.

You don’t have to sacrifice the flexibility of spreadsheets to avoid operational risk.  SS&C PORTIA offers complete middle-to-back office solutions for asset managers who are looking to improve the efficiency of and control over their operations.  PORTIA incorporates extensive business logic to automate operations, giving you control over how PORTIA is configured to meet your unique business needs.  Automated processes ensure data integrity by reducing operational risk associated with manual intervention.  PORTIA takes this a step further, using your business logic to proactively initiate checks to ensure data accuracy before automating data imports.  In addition to automation-driven solutions, PORTIA offers substantial compliance, audit and reporting capabilities to satisfy the evolving data needs of auditors, regulators, investors and other stakeholders.

Are you relying on spreadsheets to power your operations?  If so, contact us to learn more about how PORTIA can help you improve visibility and control over your middle-to-back office.

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Global asset managers are facing an exciting opportunity as the industry is poised for significant growth.  A recent PwC paper titled “Asset Management 2020: A Brave New World” predicts assets under management will exceed $100 trillion USD by 2020, but warns that “technology will have become mission-critical to drive customer engagement, data mining for information on clients and potential clients, operational efficiency, and regulatory and tax reporting,” and the current low-tech infrastructure of the industry is insufficient.

In response to the global financial crisis of 2007-2008, international regulatory environments are changing and creating increasingly complex operating challenges.  Globalization will be a valuable strategy to take advantage of the coming growth in emerging markets and recovering established economies.  However, in Ernst & Young’s recent global survey on asset management investment operations, “Managing Complexity and Change in a New Landscape,” they note that for 82% of surveyed asset managers cited compliance with regulatory requirements as a top operational challenge over the next twelve months.  Asset managers must adapt to the variation between the regulations in each country in which they operate, but this can be costly.  It requires firms to dedicate resources to meet changing global requirements while taking on greater risk and compliance responsibilities, and global location strategy that provides support for clients in all time zones requires 24-hour business process and technology development.  E&Y notes that for 44% of global asset management firms, “the cost of compliance represents between 11-25% of their operations budget.”

Operating models must adapt in order to accommodate the changing demands of the industry. Operational activities include accounting for reconcilements, corporate actions, and client activity throughout the day to ensure that the business is operating on timely and accurate data while fulfilling its duties to minimize risk.  Many firms do not have the capabilities to automate these complex data flows within the changing demands of the growing industry, adding unnecessary risk and inefficiencies as the staff must be manually involved in the process.

Application hosting provides some additional security and management, but it is not sufficient to best position asset management operations for the coming growth.  E&Y posits that “with the exception of a minority of firms, the question is no longer whether to outsource; instead, firms are considering which functions can be outsourced.”  An outsourcing service can examine each firm’s unique operational processes to gain an understanding of your business requirements.  The provider can then determine which processes can be automated and monitored by experts to ensure that your operations run seamlessly.  An outsourcing provider is in the business of remaining ahead of the changing regulatory environment, so you can be sure that your operations will always be in compliance with industry requirements.  Automation reduces operational risk, improves efficiency, and allows clients to focus on their core mission, and an outsourcer who specializes in global operational efficiency will best position your firm to compete effectively for the coming opportunities.

To learn more about the benefits of outsourcing, download SS&C’s latest position paper titled “SS&C Outsourcing Services: Beyond Hosting.”


Global insurance firms face difficult economic conditions and must respond to growing demands from investors while remaining competitive.  Recently, PwC released a paper titled “The art of letting go: Middle- and back-office right-sourcing options for insurance investment management” in which they recommend a solution that will help insurance firms compete more effectively: outsourcing middle-to-back office investment management functions.  This is quickly becoming the standard in the investment world; over 80% of CIOs recently surveyed by Goldman Sachs look to outsourcing solutions to support their complex investment management operations, and PwC advises insurance firms to seriously consider the benefits.

According to the paper, over $1.4 trillion of insurance assets are currently being managed by professional asset managers, and that number is growing.  Insurance firms can focus their resources on their core business when they utilize outsourcing for the middle-to-back office.  PwC notes that rather than spending time creating portfolios that are diverse enough to avoid risk while still meeting regulations, insurance firms should employ technology and services provided by industry experts that will minimize risk while increasing returns.  Without leveraging the specialized knowledge of experts, firms may be at a competitive disadvantage.

SS&C provides holistic outsourcing solutions for global insurance firms.  Our solutions allow firms to choose which middle-to-back office functions to outsource, so clients can take advantage of our industry expertise while aligning to their unique business goals.  With over fifteen years of experience in providing outsourcing services, we have created a world-class model for managing operations, giving our clients peace of mind that their processes are being handled by the best.    Are you ready to outsource your middle-to-back office operations so you can focus on what you do best?

Growth and globalization are changing the investment management industry, and asset managers need to prepare their operations to best position their firms for new opportunities.  PwC predicts that between 2010-2020, over one billion middle-class consumers will emerge globally.  Emerging markets will continue to expand, and global asset managers need to be prepared for new wealth.  Without a flexible operations system in place, firms may not be able to make the changes necessary to take advantage of the growth.

Christy Bremner, Senior Vice President and General Manager at SS&C Technologies, comments on the market and provides guidance for asset managers in her recent blog post for BobsGuide, “Now Is The Time to Invest In Technology that Enables Growth.”  Find her guidance and the three key features that are crucial in assessing the readiness of your operations here.

questionsAs the asset management industry returns to growth and becomes increasingly complex, firms are competing more so than ever on a global scale and seeking alpha from new sources. Our recent whitepaper titled “Now is the Time to Invest in Technology that Enables Growth and Performance suggests the question for most asset managers now is how do I prepare my business for growth and differentiate in a globally competitive marketplace?

 Unfortunately growth can be limited by operational capabilities, as well as the underlying systems and technology that support operations. While investment teams must be able to change investment strategies quickly to react to opportunities, it can be far more difficult for operations to keep pace with business changes. Asset managers need to determine whether they can meet the growth requirements by examining their operations and the systems at the heart of their middle-to-back office technology ecosystem.

 Whether systems and technology are “legacy” is not the pertinent question. Legacy is vaguely defined and implies years of operating experience is somehow bad when, in fact, asset managers benefit significantly from the functionality and capabilities that can only accumulate over time. Also, a proven track record is critical to reliability and predictability of services. What is important is the ability of your provider to support growth plans. To determine whether your firm is capable of meeting your growth needs, ask the following questions:

  • Are your systems able to easily keep pace with your firm’s growth and increasing operations volumes resulting from growth?
  • Are you expanding to other markets or countries, and can your operations accommodate expansion?
  • Do your systems provide enough flexibility to quickly address ad-hoc client requests?
  • Can your systems be easily customized to meet new operational requirements? Are you able to manage your system independently and cost-effectively as you grow?

If you answered ‘No’ to any of the questions above, your organization may be relying on systems that could get in the way of your firm’s ability to launch new products, enter new markets, optimize workflows, control costs and reduce human error and operational risk. Ultimately, all of these issues culminate in a larger problem – impeding your growth plans.

If you’d like to learn more about SS&C PORTIA and how it can help to power growth at your institution, please visit our website.


Recently, PwC released the results of its 17th Annual Global CEO Survey – Asset Management Sector (full details and analysis of the survey can be found on the PwC site by clicking here). The survey set out to learn how CEOs and business leaders around the globe feel about the future of their business and the outcome was… optimistic!  

While the recovery of the financial services sector has been slow, PwC’s research and survey shows that conditions are favorable to expansion. Business leaders in the asset management sector are projecting both organic and inorganic growth over the rest of the decade. Here are some key statistics:

  • 97% of the survey respondents are confident about their revenue prospects over 3 years
  • 58% percent of CEOs are planning to hire in 2014
  • 41% are growing through M&A, joint ventures and alliances
  • To support this growth, 81% of CEOs see technology as a tool to transform their business
  • 89% said that IT needs to be prepared to capitalize on transformative global trends
  • As a result, 53% of CEOs are changing their technology investments.

This prospect for growth is leading asset managers to ask themselves “How do I prepare my business for growth and differentiate in a globally competitive market place?”

As asset mangers gain more confidence in the recovery, they are implementing more aggressive strategies to capitalize on the growth potential. For example, front-offices are pursuing more complex and diverse investment strategies to compete in a global marketplace. But as firms look to execute these strategies, many are finding that their operations platforms are not keeping pace with the needs of the market. Modern accounting systems are growth enablers, whereas poorly developed and maintained systems are costly, risky, functionally lightweight and can inhibit growth.

Implementing a proven accounting solution, such as SS&C PORTIA, allows asset managers to grow while ensuring the integrity of their operations. Accounting solutions must offer global processing to support revenue growth, provide visibility and control of operations to reduce risk, and be manageable by operations teams to reduce total cost of ownership. SS&C PORTIA provides a clear advantage for asset managers who need an accounting solution that can grow and adapt with their business, which is why firms ranging from small, domestic asset managers to the world’s largest and most global financial institutions rely on SS&C PORTIA to power their operations and fuel their growth.

–          Matt Bellias, Head of Strategy and Marketing

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As financial institutions weigh the need for an Investment Book of Records (IBOR) and what type of system is needed to address this issue, they must also consider the risk of not implementing an IBOR solution.

An IBOR is a necessity for organizations that have their assets held in disparate systems – either in multiple deployed systems siloed throughout their organization or as part of outsourcing relationships with one or more custodians or service providers. Without an IBOR in these situations, financial institutions are vulnerable to a number of risks:

  • Inability to assess investment risk – without a holistic view of positions and exposures, the financial institution cannot effectively assess and manage investment risk, which could lead to unexpected and major losses if the company is overexposed in a distressed area.
  • Poor decision making – if a financial institution cannot produce an accurate and timely view of positions, investment professionals cannot make informed decisions, leading to poor performance and loss of client trust.

There are additional risks for financial institutions that outsource their middle-to-back office:

  • Data quality issues – although the outsourcing service provider is responsible for processing client data, it is ultimately the financial institution’s fiduciary responsibility to ensure accuracy. If the financial institution has no way to independently verify that pricing data, corporate actions events, transaction activity and positional data is accurate, they will be held accountable for any errors and the ensuing ramifications.
  • Lack of redundancy – if something happens to a custodian or service provider, the financial institution without a shadow book of records may not have quick access to client data to continue “business as usual” for clients, hindering their ability to provide quality service and affecting performance.
  • Overreliance on vendors – when a service provider is the sole owner of the financial institution’s data, this can create too great a dependency on that vendor, making it difficult to switch vendors should the relationship require changing.

Since an IBOR gathers and processes investment information in one place, it can help mitigate these risks by validating accuracy before data is distributed and by providing a common set of investment data to users and up/downstream systems. It also gives financial institutions control over their data, allowing them to make more informed investment decisions, better assess investment risk and meet fiduciary responsibilities.

To learn more about what an IBOR is and what to look for in an IBOR solution click here to download a copy of our whitepaper “SS&C PORTIA: Why You Should Consider an IBOR”.

This blog post is the third in a series from SS&C PORTIA on the importance of implementing an IBOR solution. View our recent posts titled “What is an IBOR” and “What to Look for When Selecting an Investment Book of Records (IBOR) Solution.

–          Matt Bellias, Head of Strategy and Marketing