In 2014, Confluence predicts fund administrators will begin the paradigm
shift from cost centers to strategic growth engines by tapping
long-overlooked data goldmines. New technology investments will enable
them to deliver instantaneous and accurate information, thus creating
competitive advantage in an increasingly global marketplace.
Regulatory and technological advances have positioned the investment
fund industry to become truly global, but old technology has constrained
growth. In the coming year, downward price pressure from fund managers
and growing demands to support international distribution will prompt
new back office investments in both efficiency and innovation.
"It is no longer enough for back offices to merely cut costs. Going
forward, the most innovative won't just reduce - they will produce,"
Confluence Chief Operating Officer Skip Smith said. "They will also
apply the lessons the banking industry learned more than a decade ago
and find new ways to leverage data and automate to achieve real
efficiency and drive growth."
This evolution from cost center to growth driver will be facilitated by:
1. Leveraging data as a strategic growth asset
2. Explosive growth of distribution in Europe
3. Investment advisers becoming less specialized
Back Offices that Tap Their Data Goldmines will Avoid Commoditization
and Contribute to Growth
The fund industry is becoming commoditized as fund managers scrutinize
the costs of undifferentiated third-party administrators and seek better
service at a better price. In the next 12 months, Confluence believes
more money will be spent on back-office technology, but with far fewer
"Savvy fund administrators will realize they sit on a goldmine of data
that, if extracted quickly and delivered in a consumable format in real
time, can help drive sales growth. They will differentiate themselves
with more solutions, quick payoffs and transformative technology," Smith
said. "We expect more back offices to automate routine activities and
displace prevailing processes such as typesetting, which is currently an
outsourced reporting botteneck. And they will use technology to deliver
fact sheets and other data to their middle and front offices faster and
more accurately, enabling fund companies to better attract investors and
thereby extract real value from the back office."
Explosive Growth in Europe will Necessitate Long-Overdue Back-Office
The private placement regime allows non-European alternative investment
managers to distribute to Europe, and AIFMD and UCITS "passports" are
reducing the burdens and costs of cross-border selling on the Continent.
Fund administrators on both sides of the pond have the opportunity to
build competitive advantage by offering new services that can help their
clients increase distribution into global channels.
"In recent years, tumultuous financial markets and lower profits have
inhibited IT spending among financial services firms," Smith said. "But
the heavily manual processes and spreadsheets still used in many back
offices now pose a very real risk of impeding fund companies' growth by
limiting their scalability and exposing them to reputational risk."
Confluence believes an increase in distribution activity across Europe
in 2014 will lead to increased investment in data management and
automation to accommodate the scale necessary to operate internationally
and to aid in regulatory compliance.
As Investment Advisors Become Less Specialized, Administrators Will
Need Flexible Platforms that Support Various Investment Types
In 2014, Confluence believes that even more asset managers will sponsor
multiple types of funds, e.g. companies that typically offered mutual
funds will launch hedge funds, and vice versa. Further, fund advisors
are diversifying more than just fund types: Individual advisors are
launching multiple fund types within multiple domiciles.
Some back offices have cobbled together disparate platforms to create
systems that can handle the various requirements of traditional, mutual
funds, UCITS, alternative investments, ETFs and other products, but
these systems cannot yet handle the consolidated investor reporting
clients will demand, or meet high standards in transparency, risk
management and regulatory compliance across the entire suite of funds.
In 2014, we will see back-office technology advance to provide more
efficient data harmonization, and those who can automate global
regulatory changes and reporting across a diverse suite of funds will be
better able to take advantage of opportunities for scale and adapt to
For more than 20 years the global investment management industry has
come to trust Confluence to deliver innovative solutions to take the
risk out of fund administration. Helping investment management companies
gain unprecedented control, Confluence automates every step of the fund
administration process - including the collection, creation,
confirmation and delivery of investment product data. Results are lower
costs, reduced risk, decreased reporting turnaround times and the
scalability to automate more processes without additional resources.
Confluence solutions are used by 40 percent of the leading global
investment managers, and more than 60 percent of U.S. mutual funds. From
the Confluence traditional install, hosted and outsourced Unity®
platform solutions to our enterprise-grade SaaS enabled Unity NXT
platform, Confluence automates critical fund administration and
reporting processes - such as regulatory reporting, financial statement
preparation and performance reporting. Confluence solutions support a
wide array of collective fund investment types - including European
domiciled UCITS, alternative investments, traditional U.S. based '40 ACT
mutual funds, and contemporary fund structures such as ETFs.
Headquartered in Pittsburgh, PA, Confluence serves the international
fund industry with key locations in San Francisco, CA, London and
Luxembourg. For more information, visit www.confluence.com.
[ Back To NFVZone's Homepage ]