‘Mega trends’ in the investment world, such as consolidation among big super funds, do not occur in a straight line, says Rob Brown. And the consequences are predictable. If a firm is going to build a transformational platform, it might find there is not a lot of money available.
Brown, the chief executive of ACSA, told the Fund Summit conference that the mathematics behind consolidation meant that funds had less money to spend, per member, than before. He could have added that the subsidisation by small balance members of the larger balance members, prior to the $6,000 transfer rule for ‘inactive’ members introduced this year, also impacted on available funding for new technology platforms.
For its part, ACSA had been providing some forums in the funds space aimed at reducing duplication of effort in the onboarding of clients by asset servicing firms. The search for efficiencies in investment operations is getting more important.
Chris Mackey, the chief executive of Mackey RMS (Research Management Software) of the US, said that up to 40 per cent of an analyst’s time was spent looking for data which his or her firm already owned. “We can’t get this down to zero,” he said. But we can get it down to lower single digits… There are a lot of inefficiencies that can be tackled along the way.”
He said, in answer to a question as to whether the decade starting in 2020 was the decade when operations would become ‘sexy’, that there was definitely an appetite to streamline the whole investment process.
“One of the most exciting market for us is Australia,” he said. “And the reason is because of that desire for more efficient processes. We started our firm in 2011 with that ambition and hope in mind.”
But outsourcing requires governance and management. In a separate session at the conference, Anna Leibel, the chief information officer at UniSuper, said that the governance of data was becoming an increasing focus for her fund, as well as the regulator.
“I’ve worked in other industries where a lot of the outsourcing was driven by cost,” she said. “I don’t think that’s a good place to start. Now, we are looking mainly for ways to improve the customer experience.”
Rob Scott, the COO at First Sentier Investors (the former Colonial First Sate Global Asset Managers, now owned by Mitsubishi) said that with a current search for an outsource provider his firm was currently doing, “it may well come down to a ‘touchy feely’ thing. Can we work with them? Do they have a similar culture? We’re currently trying to put some math around that.”