Topic Selection for this Vendor Demo Day

Transcription

1 Topic Selection for this Vendor Demo Day Interpreting ICAC Members Polls Carol Penhale, Principal, Cutter Associates ICAC Toronto, Canada May 13, 2008

2 Agenda Germination of this Vendor Demo Day Members Poll Reconnaissance Cutter s Credentials Reading Between the Lines on the Poll for Today s Venue Members Poll Interpretation Final Thoughts 2

3 Germination of This Vendor Demo Day How Today s Content Evolved Members feedback to ICAC Executive was consistent - most wanted to see vendor demos There was no consistency, however, on type, scope or vendor offerings members wanted to review The vendor names proposed to ICAC Executive by members was long and eclectic The challenge was to structure a 1-day conference to educate, not confuse We structured a poll that asked the types of functionality ICAC wanted to see, not specific vendor names As back up to validate our inquiry on the real issues facing members, we also asked what operational challenges firms were facing 3

4 Cutter s Credentials What is Cutter s Experience to Make These Recommendations? Cutter works with asset management firms to make them more competitive by improving investment processing 4

5 Sample Library of CutterResearch Over 3,000 People in 180+ Firms and $23 Trillion AUM Rely Upon It Front Office Derivatives Management Tools Electronic Trading Systems Fixed Income Analytics Portfolio Management Systems The Future of the Trading Desk Trade Order Management Systems Trading Effectiveness Middle Office Client Reporting Systems Data Warehousing Fixed Income Performance Attribution Middleware (Transformation- Layer, Message-Oriented) Performance Measurement and Attribution Systems Back Office Corporate Actions Processing Corporate Actions Systems FIX and XML Reference and Pricing Data Management Systems Reference Data Systems Enterprise Data Management Strategies Derivatives Systems Enterprise Architecture Equity and Fixed Income STP Integration Strategy and Architecture Market Data Organizational Structures Outsourcing Portfolio Accounting Systems Portfolio Manufacturing Systems Risk Management Systems T+1/Straight-through Processing 5

6 CutterConsulting Has Over 400 Engagements Samples of Work With Firms form $500 million to $500 billion AUM Strategic Assessment and Strategy Portfolio Accounting System Search & Selection Disaster Recovery Strategy Performance Strategy and Search OMS Search and Selection Fixed Income Strategy Business Process and Systems Re-Architecture Derivatives System selection Middle and Back Office STP Strategy & Roadmap OMS Search and Selection Eagle Pace Implementation Derivatives Processing Project Private Equity System Search Development & Execution of Strategic Plan CRD Implementation Reference Data Vendor Selection Review Latent Zero Implementation Performance Systems Review Enterprise Architecture IT Strategy and Systems Search Data Management Strategy Trading Systems Search and CRD Implementation Global Investment Systems Upgrade Review & Planning Portfolio Management Systems Strategy 6

7 CutterBenchmarking Peer/Industry Comparisons Benchmarked functions evaluate capabilities, risks & effectiveness CutterBenchmarking CutterMetrics 2007 Global Operating Models Enterprise Architecture CRM Outsourcing - assessment of vendor capabilities; types of services; pricing and measurement strategies; user ratings Supporting Alternative Investments Trading IT and Operations Priorities Annual Report 2008 Trading Performance Measurement Data Management Compliance IT Spending Priorities Derivatives Management Portfolio Management Client Reporting Corporate Actions Settlement Annual Report 2007 Q1 Q2 Q3 Q Q1 Q2 Q3 Q4 Trading Compliance Portfolio Management Corporate Actions Data Management Performance management IT and Operations Spending and Headcount Client Reporting and CRM 7

8 Members Poll Reconnaissance Question 1: Functionality Needs Identify Up To 4 Functions That Are a Priority for Your Firm for Future Software Purchases 1. Client Relationship Management 2. Pre & Post-Trade Compliance 3. Performance Measurement 4. Performance Attribution 5. Trading of Derivatives 6. Pricing/Accounting of Derivatives 7. Risk Measurement 8. Risk Analytics 9. Portfolio Management and Accounting 10. Client Reporting 11. Order Management 12. Execution Management 13. Data Warehouses 14. Pricing and Reference Data 15. Corporate Actions 16. Private Equity/Real Estate/Infrastructure Accounting 17. Other, please specify 41% 23% 11% 5% 11% 9% 50% 32% 25% 9% 0% 7% 8

9 Members Poll Reconnaissance Question 2: Operational Challenges From the list of operational issues, identify 4 pressing issues causing you to consider new software solutions 1. Complying with NI % 2. Best Execution Policy Development and Adherence 3. Derivatives Pricing 4. Supporting Alternate Investments 5. Outsourcing vs. In-House Systems Capabilities 6.Transaction Cost Analysis 7.Challenges with Market Data Quality/Timeliness 8.Consolidated Reporting Challenges 9.Data Management 10.Escalating Business Demands Not Met By Aging Systems and Application Architecture 11. Other, please specify 5% 20% 27% 16% 30% 30% 9

10 Reading Between The Lines What Did the Poll Tell Us? No one stop shopping for functionality challenges of 16 choices, it was still not enough with 4 other answers Most popular response on functionality was to purchase/replace portfolio management and accounting systems Operational issue priority answers varied almost as much as functionality responses Answers to both categories lead us to three areas of focus today: CRM, OMS, portfolio management and accounting The three areas of focus for today is very aggressive but small in relation to the demand for systems exposure by ICAC members Let s explore the reasoning behind the Agenda for today 10

11 Members Poll Interpretation Question 1: Functionality Most popular picks do not always mean greatest need Prioritization 1. Client Relationship Management 2. Pre & Post-Trade Compliance 3. Performance Measurement 4. Performance Attribution 5. Trading of Derivatives 6. Pricing/Accounting of Derivatives 7. Risk Measurement 8. Risk Analytics 9. Portfolio Management and Accounting 10. Client Reporting 11. Order Management 12. Execution Management 13. Data Warehouses 14. Pricing and Reference Data 15. Corporate Actions 16. Private Equity/Real Estate/Infrastructure Accounting 17. Other, please specify 41% 23% 11% 5% 11% 9% 50% 32% 25% 9% 0% 7% The #1 choice does not necessarily mean the root of the problem for many firms for many, this is the ONLY system they have, so it s hard not to blame it! The challenge is often types of instruments or data detail for which the system was not set-up or designed 11

12 Members Poll Interpretation Question 1: Functionality Functionality footprints are not easily understood at times Prioritization 1. Client Relationship Management 2. Pre & Post-Trade Compliance 3. Performance Measurement 4. Performance Attribution 5. Trading of Derivatives 6. Pricing/Accounting of Derivatives 7. Risk Measurement 8. Risk Analytics 9. Portfolio Management and Accounting 10. Client Reporting 11. Order Management 12. Execution Management 13. Data Warehouses 14. Pricing and Reference Data 15. Corporate Actions 16. Private Equity/Real Estate/Infrastructure Accounting 17. Other, please specify 41% 23% 11% 5% 11% 9% 50% 32% 25% 9% 0% 7% While some firms operate these pieces separately, common practices have them consolidated in a trading system. The prominence of these answers, confusion on OMS vs. EMS & concerns over best execution/ NI drove us to focus on OMS for part of the day. 12

13 Members Poll Interpretation The Rising Area of CRM Sophistication Question 1: Functionality Prioritization 1. Client Relationship Management 2. Pre & Post-Trade Compliance 3. Performance Measurement 4. Performance Attribution 5. Trading of Derivatives 6. Pricing/Accounting of Derivatives 7. Risk Measurement 8. Risk Analytics 9. Portfolio Management and Accounting 10. Client Reporting 11. Order Management 12. Execution Management 13. Data Warehouses 14. Pricing and Reference Data 15. Corporate Actions 16. Private Equity/Real Estate/Infrastructure Accounting 17. Other, please specify 41% 23% 11% 5% 11% 9% 50% 32% 25% 9% 0% 7% The next most prominent answer was CRM as many look for systems to manage the growing challenge of multiple touch points with clients, growing KYC requirements and management complexity. This was the most logical to round out the focus on a very busy day. 13

14 Members Poll What s Off the Table for Today Question 2: Operational Challenges The impact of reviewing the operational challenges best execution 1. Complying with NI Best Execution Policy Development and Adherence 3. Derivatives Pricing 4. Supporting Alternate Investments 5. Outsourcing vs. In-House Systems Capabilities 6.Transaction Cost Analysis 7.Challenges with Market Data Quality/Timeliness 36% 5% 20% 27% 16% 30% Canadian firms are confusing the concept of best price with best execution. There is no systems silver bullet for best execution, but an OMS will help these 3 areas enormously 8.Consolidated Reporting Challenges 9.Data Management 10.Escalating Business Demands Not Met By Aging Systems and Application Architecture 11. Other, please specify 30% 14

15 Members Poll What s Off the Table for Today Question 2: Operational Challenges The impact of reviewing the operational challenges alternate investments 1. Complying with NI Best Execution Policy Development and Adherence 3. Derivatives Pricing 4. Supporting Alternate Investments 5. Outsourcing vs. In-House Systems Capabilities 6.Transaction Cost Analysis 7.Challenges with Market Data Quality/Timeliness 36% 5% 20% 27% 16% 30% The entire derivatives/ alternate investment space scored low on both polls, causing us to strike it from the list for this day. 8.Consolidated Reporting Challenges 9.Data Management 10.Escalating Business Demands Not Met By Aging Systems and Application Architecture 11. Other, please specify 30% 15

16 Members Poll What s Off the Table for Today Question 2: Operational Challenges The impact of reviewing the operational challenges data 1. Complying with NI Best Execution Policy Development and Adherence 3. Derivatives Pricing 4. Supporting Alternate Investments 5. Outsourcing vs. In-House Systems Capabilities 6.Transaction Cost Analysis 7.Challenges with Market Data Quality/Timeliness 8.Consolidated Reporting Challenges 9.Data Management 10.Escalating Business Demands Not Met By Aging Systems and Application Architecture 36% 5% 20% 27% 16% 30% 30% Getting good data, producing enriched transactional data and slicing and dicing data for reporting are huge issues but not easily addressed without decent capture systems. These are worthy topics for a sequel vendor demo day. 11. Other, please specify 16

17 Members Poll The Other Category Everyone always wants to know Question 1: Functionality Needs Calculating and creating invoices Composite construction and maintenance Client (vs. account) modeling and rebalancing Question 2: Operational Challenges None CRM KYC updates Quality of performance measurement Inflexibility of outsourced packages Eliminate end user computing applications 17

18 Final Thoughts Be as extensive on your due diligence for systems as you would for stock picks - don t assume you know the vendors & functionality after a 20-minute a demo today also don t assume you have enough of a sampling of the marketplace The 3 areas of focus for today all need to addressed by firms before successfully tackling functions such as performance and risk Operations, processes and systems will continue to lag growing sophistication and complexity of new instruments and client demands if you firm has not invested in any technology in a decade, you should not be surprised you are here today You are not alone - volumes and complexity have to hit a critical mass for most firms before special systems can be considered for budget and resource allocation reasons If there is benefit in the awareness gathered from today on the footprints of functionality available in the marketplace, consider pursuing further vendor examination in target areas for your firm 18

19 Questions & Answers Topic Selection for this Vendor Demo Day Interpreting ICAC Members Polls Carol Penhale, Principal, Cutter Associates ICAC May 13,