Operational challenges facing investment managers in 2015

During the spring and summer of 2014, SWIFT interviewed the heads of investment operations and fund distribution at six of the ten largest investment management firms to assess the current and future operational needs of the investment management industry.

These firms and their counterparts at more than 30 other investment management houses (encompassing the long-only, alternative only and both long-only and alternative sectors), completed a detailed questionnaire. By conducting this research SWIFT aims to capture and better understand the operational challenges facing this important sector, with a view to working together with the industry to find shared solutions.

In this white paper, we discuss the industry challenges uncovered by this research, including:

• The heavy impact of regulation on investment managers- Managing regulatory reporting and compliance is taking up considerable time and effort. As a result, less time is available to innovate and respond to new client demands.
• Specific pressure resulting from KYC, AML and sanctions screening due diligence - Investment managers are looking for utility solutions to provide more efficient sources of reliable data.
• Mitigating outsourcing risks- Investors and regulators are encouraging investment managers to focus on business continuity and risk mitigation, especially in the case of outsourced services.
• Inefficiencies in corporate actions processing- There is clear appetite for a single, authoritative source of reliable corporate actions information (perhaps as a shared utility), and greater demand for enforceable rules binding issuers.
• The growing importance of collateral management - Post-crisis regulation is prompting investment managers to address the costs and risks of managing collateral.
• A lack of standardisation in post-trade processing of transactions- The processing of some asset classes (notably OTC derivatives, but also repos, collateral movements, stock loan and investment fund settlement and registration) continues to be impeded by low levels of standardisation.
• New forms of fund distribution support are needed- Investment managers face challenges in distributing an expanding range of fund types into a number of geographical markets through a growing range of infrastructures adopted by investors.