Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Systems pipeline suggests healthy future
(Pictured: Darren Stevens)
Systems providers in the financial services industry tend to be a good leading indicator of the industry’s position. If that is currently the case, the industry is in ruddy good health, according to Bravura Solutions.
Darren Stevens, Bravura’s director of strategy, says that his “pipeline” of new business possibilities has doubled in the past six months as fund managers are seeking to abandon their legacy systems.
“They are assessing what they now realize are brittle solutions which they may have bolted onto an old system,” he says. “They’re also assessing the cost of compliance and seeing that the longer-term value is in having an up-to-date system.”
Bravura, which has recently been taken over by its private equity partner, Ironbridge Capital Management, which had had a majority stake in the firm for several years, is looking to capitalize on the various trends in the industry.
Stevens says: “In Europe, our transfer agency business is offering the next generation platforms because life companies are coming under retention pressure… Pension providers are looking to bring life products onto their platforms.”
In Australia, Bravura is best known for its Sonata wealth management system. The system also has a heritage from being a ‘life solution’, as Stevens puts it, through to a modern platform catering for complex models and tax planning.
But, he says, the new platforms being introduced in the UK are more advanced than their Australian counterparts.
“We are providing cloud-based solutions in Europe,” Stevens says, “whereas there is still a preference in Asia Pacific for in-house installed and hosted systems.”
Bravura, along with other big providers, has been working on what the systems people refer to as “continuously available software”. This is a new methodology which allows for “agile development” with automated testing of more frequent changes.
Stevens says: “Instead of having a once-a-year release of an updated version of something, you have a process where the client can decide what iteration they want and can be confident that it has already been tested on their own configuration. It’s lower risk and lower cost. It’s fit for purpose.”
The Australian trend in funds management is a blurring of the old distinctions between retail funds, industry funds and SMSFs. Bravura has the Garradin system for the self-managed market, which it acquired some years ago. It continues to invest in R&D in Garradin.
About 70 per cent of Bravura’s revenue now comes from EMEA markets. It has 14 offices in 10 countries.
“We have a very strong pipeline in Australia,” Stevens says. “And a lot of that is around the migration of legacy systems to modernization. Up until now, it has been expensive to modernize.”
