Trading Reimagined is a content series that examines how the transformative power of technology is prompting a reimagining of the markets. Trading Reimagined is sponsored by Exegy.
Buy-side firms’ top two priorities for this year are improving operating efficiency (cited by 54%) and controlling operating costs (46%), followed by improving customer experience (40%) and accelerating time-to-market for new offerings (37%).
That’s according to the newly released 2024 Global InvestOps Report, which was produced by WBR Insights and commissioned by SimCorp. The report was derived from responses provided by 200 senior executives globally, including chief investment officers, chief operating officers, and directors of operations.
The current top priorities are markedly different from last year’s report, which showed innovation, customer experience, and keeping up with regulatory requirements as the top three. Operating efficiency was #5 and cost control was #7.
To the question of what technology and operations initiatives firms are planning to support strategic priorities, the top three were improving data and operations support for multi-asset investment strategies (43%); integrating new technologies with existing platforms/systems (42%); and engaging a service provider for operational processes (41%).
“Many respondents are working towards integrating new technologies into existing platforms,” Panos Nikopolitidis, Global Head of Operations at Janus Henderson, said in the report. “We have been working towards migrating to cloud-based applications, improving our data model and driving more automation and digitization. These all go hand-in-hand with uplifting our global operating model to enable our investment, client, and corporate strategies.
“Our global operating model is a hybrid one,” Nikopolitidis continued. “We have outsourced part of our middle office and all of our back office, so we do rely on our service providers. Therefore, ensuring our service providers are on a similar strategic path when it comes to technology and data solutions/services is of vital importance to us.”
The topic of outsourcing was revisited later in the report, which showed that 31% of respondents planned to outsource more functions over the next two years, versus 55% who expect no change and 14% who plan to insource more.
“While the discussion on outsourcing is a cyclical one, traditional outsourcing was all about doing the same thing cheaper by some sort of speed/labor arbitrage,” Ruchir Verma, Head of Business Development, Investment Administration & Accounting, Investment Management at Zurich Insurance said in the report.
“I think that arbitrage can now be achieved in many different ways and we now see more and more firms turning to tech-enabled services whether that be insourced or outsourced,” Verma continued.” That decision is really based on whether a function provides a competitive edge and if not, it could be managed by a scale vendor.”
The report noted that common barriers to outsourcing include a fear of losing control, potential quality issues, and cost factors, so firms must have trust in the provider, secure stakeholder buy-in, and recognize that one size doesn’t fit all.
In conclusion, the report noted the importance of buy-side firms challenging the status quo to survive and thrive amid heightened competition and rising costs. Three guiding principles to scale operations are: “turbocharge” your core business, i.e. what provides uniqueness / differentiation; ensure access to the larger ecosystem for continuous innovation; and seek services powered by best-in-class technology for non-core activities.
