Asset managers look to Cloud and AI to drive recovery, study finds

By Gaia Lamperti

Investment in technology and data infrastructure sits at the top of asset managers’ priorities as they position themselves to deliver business growth in the recovery from the Covid-19 pandemic.

These are the findings of a global study, The Future of Investment Operations, carried out by Funds Europe for banking software company Temenos. A group of international asset management professionals were surveyed, and the majority of their answers (56%) revealed that in the upcoming 12 months investments will be focusing on Cloud technology and AI, with particular attention to ESG compliance.

According to the Temenos survey, which took into consideration global investment professionals across the whole asset management sector, Covid-19 has pushed firms to review their IT strategies and transition to the public/hybrid Cloud. About 62% of respondents said that Cloud-native solutions have the potential of playing a key role in their IT strategy, followed by the importance of Software-as-a-Service (SaaS) solutions (48%) and the use of open API technology (46%).

“In mapping out the road to recovery, asset servicing firms and fund managers are increasingly looking to take advantage of the tools, analytics, and scalability of the Cloud,” Barry Lee, Business Solutions Director, Temenos Multifonds, said. ”Temenos’ SaaS-based Explainable AI (XAI), for example, enables our fund administrator clients to use AI to reduce manual interventions, detect potential breakdowns in workflow, and speed up exception management related to price movements. This future-proofs their operations against black-swan events and increases overall efficiency and productivity.”

To improve levels of operational efficiency, firms are seeking seamless interconnection between functions along the investment value chain. In the survey, 83% of asset managers say they will extend their strategic alliances with asset servicing and tech partners, in order to enable connection of middle- and back-office services straight to their front office tools and investment book of record (IBOR).

AI and Machine Learning will also occupy an increasingly important role in delivering insights, both predictive and ex-post analytics, across the investment lifecycle. The top applications for AI are portfolio analytics and performance measurement (60%), data sourcing, cleansing, and enrichment (57%), and improving the operational efficiency of middle- and back-office processes (56%), according to Temenos study.

However, augmenting human expertise into AI models will be a priority in applying AI models, according to 60% of respondents. This capability is essential to deliver business intelligence in a way that is explainable to product teams, customers, and financial supervisors.

Key findings of the Temenos study:

• 56% say that technology and data infrastructure will be the focus of their investment over the coming 12 months. 47% say this will be on ensuring ESG compliance across their product range
• 62% say cloud-based solutions are playing a key role in their IT strategy
• 83% of asset managers say they will extend their strategic alliances with asset servicing and tech partners, enabling connection of middle and back-office services straight to their front office tools and investment book of record (IBOR)
• 60% say portfolio analytics and performance measurement functions will benefit most from the application of machine learning and AI. 57% say this will offer the most benefit to data pre-processing