Institutional asset allocators face an increasingly complex investment landscape, but often do not have the tools to efficiently implement and manage those strategies, with many critical functions still relying on spreadsheets and aging technologies that are reaching the end of their useful lifecycle. This is according to new research from global investment fintech firm, Milestone Group.
Released today, Milestone Group’s Asset Allocation Technology Survey 2020 takes a deep dive into the current and future technology requirements of institutional asset allocators, both asset owners and investment managers.
The report explores the implications for technology capabilities arising from increasing pressure to deliver better outcomes. That pressure has driven the trend for asset allocators to design and implement more complicated investment strategies. which gives rise to portfolios that are more challenging to monitor, manage and transact. Indeed, 82% of respondents reported that investment strategies are becoming more or much more complex.
While technology is identified as being crucial to achieving investment objectives, fragmented processes remain a challenge with 50% of firms saying they use four or more systems for monitoring portfolio exposures alone. Some firms are using as many as 13 different systems/providers across all investment functions. Half of all respondents indicated that their current technology profile is comprised of multiple legacy systems and spreadsheets, while one-quarter of respondents are still using spreadsheets to manage critical functions such as monitoring portfolio exposures.
The research shows that a clear industry consensus on the best type of technology solution is yet to arrive, but when asked what their preferred technology strategy is, a plurality of respondents (38%) either currently have, or would prefer to have a ‘built for purpose institutional asset allocation investment management platform’.
Randal McGathey, Vice President Asset Allocation Solutions at Milestone Group said,
“The impact of asset allocation on outcomes is well recognized and institutional allocators continue to be both propelled and constrained by the complexity of their work. The report finds that current state technology is highly fragmented across the front and middle offices.
We know that investment strategies will advance and complexity and demand for scale will increase still further. Reading between the lines, we see evidence of an acceleration in the need for market solutions that strengthen and standardize the underlying platform while supporting product innovation and bespoke investment processes.”
For this report, Milestone Group surveyed 47 institutional asset allocators, with AUMs ranging from less than USD500 million to over USD25 billion.
The full survey report can be downloaded here.