Woodbine Associates: Maximize Alpha of Investment Accounting Platforms
Fund managers need to make certain their investment accounting systems are up to snuff or suffer the consequences of regulatory, risk management and operational failures.
That's the warning of a report issued by Stamford, Conn-research firm Woodbine Associates which was commissioned by SimCorp, an investment management software and services firm.
The study says David Kubersky, managing director of SimCorp North America, was prompted by a study conducted by SimCorp which showed that many fund managers were not satisfied with their investment accounting system and weren't certain of the accuracy of the data it used.
Investment accounting platforms either hold data or interface with separate platforms that hold data. Those systems are involved with asset custody, securities servicing, security transaction processing and cash transaction processing.
"A state of the art accounting platform is the most fundamental and far reaching means for investment managers to mitigate risks that can result in financial loss and challenge on-going enterprise operation," says Sean Owens, director of fixed-income research for Woodbine Associates. The research firm cites the following problems related to substandard investment accounting platforms: operational gaffs, compliance breaches, regulatory transgressions, failure to detect fraud, theft and human error, failure to properly value assets under management and failure to properly value and service client accounts.
Owens recommends that fund managers rely on a single operating system with real time information reporting and a single centralized database - to consolidate data from disparate sources and investment workflows on a single platform. The investment accounting platform should also be able to list multiple products and process a transaction from trading through to settlement and income payment. "A best in class system that centralizes data on a single operating platform with other features not only mitigates risk and reduces operational costs but enhances the capabilities of other areas of the firm," says Owens.
Although the report from Woodbine Associates did not specify any investment accounting systems and claims to be unbiased, the characteristics of the ideal investment accounting platform do resemble SimCorp’s platform. SimCorp Dimension allows fund managers to capture the most granular level of data in a single database, which in turn can deliver better data quality and accurate client reporting.
Written by Chris Kentouris, Editor-in-chief (Chris can be contacted through Chris.Kentouris@hotmail.com)