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Blog Posts — July 19, 2018

Top Tech Trends in Portfolio & Risk Management

Portfolio and risk management is undergoing a revolution. The technology landscape is changing and the analytics arms race is heating up, but what trends are worth paying attention to?

Axioma recently co-hosted a webinar with Aite Group, where Fabien Couderc, Axioma’s Chief Technology Officer, and Paul Sinthunont and Gabriel Wang, both Analysts from Aite Group, shared their perspectives on portfolio and risk technology. This blog summarizes the conversation, and the full, hour-long replay is available here.

What challenges did the speakers say portfolio and risk managers are facing today?

Managers are expected to deliver better results, aggregate larger amounts of data, and report more frequently than in the past. While managers are expected to do more – the industry is lagging behind. In 2000, finance was ahead of every industry and boasted the top technology, but now it falls behind industries such as retail banking. In order to keep up with the increased demands expected of portfolio managers, risk professionals and end clients, firms need to adopt new technologies and modernize their infrastructure. They need to be mindful that large scale transformations are medium to long-term projects and keep the focus on setting realistic expectations for IT projects rather than chasing the latest tech trend.

What are clients asking for?

Both Axioma and Aite talk to clients on a daily basis and notice many are speaking about the same pain points.

  • The industry demands accurate insights, including consistent data sources that can be shared throughout the enterprise.
  • Many of them are looking for ways to become more agile as a business and spend less money on infrastructure. APIs are more frequently becoming a part of the conversation.
  • There is an increased focus on total cost of ownership. Many of them want to reduce the reliance on full-time employees to support infrastructure once it is implemented and focus on their main business proposition of managing money.

Where are the gaps?

  • True straight-through processing and front-middle-back office alignment are rare in practice.
  • Regulatory pressures, especially in Europe, are another demand on firms’ time and resources and may reduce firms’ bandwidth to focus on modernization.
  • Many firms using traditional SaaS software struggle to scale up their technology to meet new, unforeseen challenges. For example, they may lack the ability to rapidly develop a stress test so they can understand the implications of a potential political or market event on their portfolio.

What technology trends are solving some of these gaps?

  • Flexibility – Firms want to move from monolithic systems to modular systems. Microservices can enable this and permit firms to rapidly connect the components of their technology ecosystem.
  • Open Systems – This can help firms avoid high costs from vendor Managed Services by enabling the firm to easily make changes in-house. In the past, opaque systems created a dependency on a vendor for future changes, which quickly became costly.
  • Importance of Data Management – Firms are investing in data governance solutions or Data as a service as the demand for a rapid, quality data exceeds firms’ abilities to manage it.
  • Demand for a Better User Experience – Today’s users have higher expectations for their user experience. Data visualizations, dashboards and web portals are now the norm rather than unique differentiators.
  • Adoption of the Cloud – Capital markets are embracing the cloud for its speed and other benefits. They need to ensure they are on cloud-native technology – read more about the difference between cloud-native and cloud-hosted here.

What hot topic are we watching?

Alternative data is increasingly becoming a topic of conversation as firms are seeking advantages in new investment strategies and support for existing strategies. Machine learning techniques are being deployed to best take advantage of alternative data sets. In fact, Aite reported that 82% of buy-side respondents to a recent survey they conducted have an alternative data strategy in place or are planning to implement one in the next 24 months.

For more on this topic, watch our webinar replay or download the presentation slides.