Buy-side firms are still resorting to legacy IT systems and manual processes, according to a survey by SimCorp and TABB Group.
The survey, The Buy-side Legacy IT Hangover: Finding the Cure for Alpha, Compliance and Growth Impediments, included asset managers outside of North America, and followed a survey of North American firms only, conducted in February.
Of non-North American firms, 30 percent said they still rely on legacy IT systems, 34 percent said they use an integrated solution, and 27 percent said they use a ‘best-of-breed’ approach, sourcing solution from different providers based on what they require.
Only 7 percent said they simply choose the least expensive option, and 3 percent said they have no strategy in place whatsoever.
These figures are fairly similar to those found in North America, where 28 percent said they use legacy systems, 30 percent use an integrated solution, and 24 percent use the best-of-breed approach.
Despite the introduction of new IT systems, 90 percent of non-North American firms said they still have to resort to manual processes due to inefficiencies in their IT platforms, which, in turn, leads to errors in data and reconciliation.
The survey report suggested that, in order to make the best use of an integrated system and an investment book of record (IBOR), firms should be gleaning their information from a single source across the front, middle and back offices.
The report said: “Firms that are experiencing pain in their trading processes due to inaccurate data across their various applications cannot afford to do nothing and to let their “current” technology become “legacy” technology.”
Outside of North America, 14 percent of firms said they have issued implementing asset allocation strategies, citing errors relating to incorrect positions. Of those experiencing these issues, 44 percent use legacy systems, 22 percent opt for the cheapest solutions, and 11 percent have no strategy.
However, asset allocation strategies were found to be a bigger problem among North American firms, with 30 percent highlighting implementation as an issue.
Setting up operations in new geographies and asset classes was also highlighted as a challenge, by 58 percent of non-North American firms and 66 percent of North American firms.
Of those outside of North America that struggle with this, 43 percent said they are using legacy systems, however 23 percent said they use an integrated strategy and 23 percent use best-of-breed strategies.
Dayle Scher, senior analyst at TABB Group, said: “As investment organisations and their clients continue to invest in new jurisdictions and asset classes, the supporting IT infrastructure must be able to support growth and scale.”
“Added to this, the growing regulatory pressures that are emerging globally means those who choose to implement integrated investment management solutions will be those that can best navigate an increasingly competitive environment.”
Martin Engdal, director of global product marketing at SimCorp, added: “For many firms, legacy investment management systems continue to be the cause of delays in setting up new geographies and instrument types, running pre-trade compliance checks, and front office staff spending time on manual processes and error handling rather than alpha-generation.”
“These findings show that an integrated solution that utilises a single data repository is the most effective way to avoid all these challenges facing investment management firms.”
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