Investment managers are increasingly looking overseas to drive growth and diversification but expanding globally comes with a set of unique challenges that can derail the benefits of scale if not managed carefully. While every organisation is different, firms that can marry global consistency with sufficient flexibility to account for local differences in operating models achieve the greatest efficiencies and benefits of scale.
Speaking at the 6th Investment Data and Technology Summit, Chris Fichardt, Global Head of Operations at First Sentier Investors, Ross Brockbank, Managing Director and Head of Alpha APAC at State Street and Karti Mahendran, Principal, Investment Technology and Data APAC at Deloitte, debated the unique challenges and considerations that expanding across the globe brings.
With key offices in Sydney, Edinburgh, Hong Kong, London, New York and Singapore, First Sentier Investors is an Australian asset manager that has truly ‘gone global’, but it’s taken a considerable transformation project to gain the full benefits of a global approach in the area of investment operations management.
Previously known as CFSGAM and owned by the Commonwealth Bank, Fichardt said that the sale of the business to Mitsubishi UFJ Trust and Banking required a redesign and untangling of shared services previously provided by the banking group. That redesign provided the clean slate that has facilitated a strategic transformation of the firm’s middle office capabilities into a truly globalised offering.
“[Previously], when we tried to grow globally, there were always limitations in servicing that we had to address internally, by resourcing up in our various regions to cover [timing gaps and other] limitations in our middle office service. Filling those gaps created costs, it created different treatments of data, from security mastering through to data tagging, and it constrained our ability to become truly global,” Fichardt said.
While managing the transformation through the pandemic added some additional challenges, Fichardt said that being able to start from scratch has resulted in significant opportunities to unify the alignment of functions including investment operations, fund operations, performance and client reporting, procurement, supplier governance and transition teams.
To efficiently manage these various functions across jurisdictions, Fichardt said it was important to aim for as much global consistency as possible, while still taking account of local requirements and considerations.
“When we think of global, we always think of functional alignments: how many components of each of these functions are the same; what is the standard model; how can we adapt to create some consistency and therefore afford scalability. We also want to be in a position – using partners, solutions and data – where we can actually follow the sun, or pass the book we operate 24/6,” Fichardt told the conference.
Brockbank agreed that a standard global operating model that provides scale benefits, yet is flexible enough to accommodate for local differences, is essential when looking to scale up across jurisdictions.
“There is never going to be a single solution that fits any single organisation everywhere they operate, but you can aim for an 80/20 rule. […] You may have a single global operating model for, say, middle office services, but you may have different order management systems in different locations. The key is to ask, ‘how much of what we do can we standardise, while retaining flexibility [to manage specific local requirements],” Brockbank said.
Mastering cross border data requirements
Many of the challenges inherent in cross-jurisdictional investment management are related to data management. As Mahendran pointed out, providing timely and accurate data is critical in investment management, but it can be quite a challenge when streamlining global operations. “Particularly in a global operating model, when you have lots of service providers providing data from different jurisdictions, those aspects become quite critical. Data governance is going to be a key component in managing that,” Mahendran said.
Brockbank agreed that a common feature across the market is the ever-increasing demand for a real time or near real time view of that data. “Simplifying the data environment is one of the biggest challenges our clients face. Aggregating and reconciling data from multiple sources is not only time-consuming and complex but can compromise a portfolio managers’ time-to-insight and increase operational costs. Clients want to be able to come in at 8am local time, look at their positions, their cash, collateral and understand what securities are out on loan – as a unified set of data, irrespective of whether they have multiple start of days [across] different investment trading locations, or it is done from a single global base” Brockbank said. Here again, standardisation is key, Fichardt said “I think the biggest issue is for businesses that are trying to go global is these legacy databases. They have data with various inconsistencies, whether it is timing – with different cycles in cash, or T+2 – or different reconciliation processes. For First Sentier Investors, being able to use a data as a service provider helps manage that single source and allows timely global access to that same data set,” Fichardt said.
However, it’s also worth revisiting the real data use cases before standardising across the board. Indeed, a common theme at the conference was that the quest for near-real time data sets can add an unnecessary burden that deflects from, rather than adds, to business efficiency.
“It is not enough to know your data well, I’d add to that you have to know your data usage and that is really critical, because when we have these conversations around ‘I need all this data and I need it now’, I am not sure that is always quite true,” Brockbank said.
That was also echoed by Fichardt. “If the thinking is ‘I want the data now and I need as much data as I can get’, facilitating that through a global environment is difficult and costly,” Fichardt said.
The panel also discussed the efficacies of ‘data’ vs ‘information’ and the importance of understanding the data.
Fichardt said that license data in particular continues to pose a key challenge. “When we look at global usage and global licensing, the more complex your global system architecture is – the number of solutions and systems you need to store information in or warehouse it – the more expensive it is to maintain that same cost. And that licensing that runs with it,” Fichardt said, adding that First Sentier has set up a separate global data function that is tied to the chief operating officer, to ensure the firm is well across the flow of data, both internally and externally.
While data is governed internally, Fichardt said there is significant benefit in outsourcing key functions. “Trying to land, house and run all of your infrastructure services in your own IT architecture construct is an obstacle to being able to scale globally,” he said. An added advantage of outsourcing is that firms can leverage off the experience of other global organisations with similar global operations.
“Rather than trying to solve everything ourselves, we look to leverage the experience of our partners, who have worked on very similar problem with other organisations. A problem shared is a problem halved,” Fichardt said.