How agile is your asset management team?

by Dan Jacobs, head of sales, Americas, Enfusion

Unlocking “agility-on-demand” by outsourcing middle- and back-office operations

There has been a lot of discussion over the last year about the need for strong business continuity practices in asset management. When the global shockwaves of COVID-19 first hit, asset managers that had business continuity plans in place were able to react quickly and equip their workforces to operate remotely with minimal disruption.

In addition to prioritising crisis-preparedness, cultivating business agility is equally as important for asset managers. What is business agility? A popular leadership methodology, business agility refers to building an enterprise that can adapt to the ebbs and flows of business growth and contraction fluidly and profitably.

The secret to unlocking business agility lies in finding the right partners to help manage for those periods of growth and contraction. As many asset managers discovered this year, having an outsourcing partner that manages middle- and back-office operations provides increased staffing flexibility and peace of mind during times of change.

In short, an agile business is in control of their talent, technology and resources. They have mechanisms in place and partners in their corner to scale up or down with speed and confidence. Let’s examine a few common scenarios for rapid growth and contraction in asset management to test your preparedness.

Test your agility

Preparing for growth: How quickly could you scale up?Protecting against losses: How effectively could you minimise downside risk?

Consider these growth scenarios:

Scenario 1: You significantly increase your AUM. You’ve had a record-breaking year with great performance and consistent returns. New investors are knocking at your door and your current investor base is interested in booking more capital with you and your team. In fact, they’d like to set up separately managed accounts, which carry increased complexity and operational burdens.

Consider these contraction scenarios:

Scenario 1: Severe market disruption hits.
You have consistently outperformed the market, even when volatility has reared its ugly head. In spite of that, your investors’ businesses have been hit hard by the economic disruption and they significantly decrease their capital contributions. With less AUM, you need to reassess your own allocation of resources including making tough staffing decisions.

Scenario 2: You introduce a new trading strategy to diversify your business. Actively managed ETFs have gotten the regulatory stamp of approval and they are gaining popularity. You would like to introduce the strategy to capture new investors and gain first-mover advantage, but need to quickly upskill for a successful and immediate rollout.

Scenario 2: A key, senior member of your team departs. Your controller or head of operations decides to leave quite suddenly. You need to quickly fill the new role to minimise disruptions to your investors and operations, while mitigating the risk that occurs when key personnel leave the firm with critical knowledge of day-to-day operations.

Agility-on-demand: Benefits of an outsourced or co-sourced model 

The above scenarios are simple examples of common growth opportunities and risks in asset management that would put new demands on a team’s time and resources.

Many asset managers have embraced outsourcing and managed services partnerships as a strategy to tap into “agility-on-demand” when these common growth or contraction events occur. Among the many benefits that a managed services partner offers, the following are three of the most critical advantages asset managers recognise in the middle and back office:

  • Seamlessly expand (or contract) your team. When the market swings in your favour or disruption hits, a managed service provider gives you the flexibility to simply dial up or dial back the level of service without jumping through the time-consuming hoops of hiring new personnel or scaling back your team. Many asset managers have also recently relocated their operations teams from high-cost cities like New York or London to areas where their overhead costs are lower. An outsourced or co-sourced model offers the flexibility to more easily make those types of shifts and take advantage of new opportunities. 
  • Optimise your in-house talent and improve their productivity. Operational staff at asset managers regularly do middle- and back-office tasks that require a substantial amount of effort. In fact, there are often millions, if not dozens of millions, of dollars on the line if those tasks aren’t completed on time. This includes reconciliation work, corporate action processing, portfolio maintenance, swap reset, ledger management, meeting compliance obligations, and cash management and treasury activities. Outsourcing those routine tasks drives efficiency and allows your in-house talent to focus on growing your business.  
  • Access outside expertise to quickly upskill your enterprise. Whether you’re expanding into a new trading strategy or your business has outgrown your staff’s expertise, having the flexibility to tap into the outside expertise of a managed service provider gives you the ability to scale and upskill quickly and seamlessly.

Choosing the right outsourcing partner comes down to evaluating your specific needs. If speed and simplicity are a top priority, it might be most attractive to expand your relationship with an existing partner rather than forging a new partnership. Benefits of this approach include minimising vendor management and avoiding a new arduous vendor due diligence process. 

Some technology providers, like Enfusion, also offer outsourcing solutions for managing middle- and back-office operations. There is considerable value in having a single provider manage both your software platform and operations. The top benefits include seamless communication across the internal partner team, increased flexibility to scale and in-depth knowledge of the asset managers’ business.

How agile is your asset management team? When growth opportunities present themselves, don’t let them pass you by or burn out your current team. Set up the necessary framework, foundation and infrastructure now so you can scale with speed and confidence.