A growing number of asset owners, including pension funds, public funds, sovereign wealth funds (SWF), superannuation funds, endowments and life insurance companies are relying on spreadsheets and ‘home grown’ solutions to monitor and manage their investment portfolio asset allocation activities.
This is according to a new research from Milestone Group that was conducted in collaboration with ValueExchange, RBC and Citisoft.
The report, Asset Owner Transformation in 2023, found that of the asset owners surveyed worldwide, more than half (55%) still use spreadsheets to monitor their asset allocation operations – up from 40% last October.
Additionally, only about two in five (41%) of respondents use a dedicated portfolio management system to generate their total portfolio view.
Using spreadsheets is an inefficient way for asset owners to manage investment data and adjust their allocation in response to economic and market events.
Marian Azer, Global Head of Product of Milestone Group, said: “Amid elevated market uncertainty, asset owners must prioritise departing from personal productivity tools like spreadsheets.”
“By adopting more sophisticated technology, investors can streamline asset allocation decision making, implementation and operations, react more quickly to market events, and gain the edge for their end investors. Those using the most efficient software and future proofed operating models will be best placed to succeed in the increasingly challenging and complex global investment environment.”
Another notable finding of the survey – which seeks to measure the true extent of digital transformation across the global asset owner segment – was that 43% of asset owners are looking to modernise their operating models and the technology that underpins their target operating models.
Meanwhile, 45% of asset owners are focused on enhancing their data management capabilities as a priority over the coming years.
While this suggests asset owners share a collective desire to depart from legacy technology and operating models used in their asset allocation investment processes, the research cited several challenges commonly preventing them from achieving this change.
The most common reason transformation projects do not succeed is a lack of expert resources available to execute them, with 41% of respondents citing this as the main hurdle.
Other challenges include projects taking too long before desired returns can be realised (18%) and difficulties in measuring the problem and defining a compelling business case (10%).
To create this report, ValueExchange canvassed the opinions of 179 asset owners from across the globe, spanning a wide variety of fund types and sizes.
Barnaby Nelson, CEO of Value Exchange, said: “With 82% of asset owners looking to drive change in their investment operations this year, the willingness to make meaningful progress in how firms manage their whole-of-fund view is clear. But transformation of this scale is never easy.”
“Moving forward, asset owners must prioritise which changes are most strategically important and sustainable in achieving their long-term goals.”
