In a difficult financial climate, investment managers are looking to maximise the value of their core systems with wider functional and asset class coverage. Support for derivatives and reconciliation processing, as well as regional tax and market practice requirements, can help firms to balance the need for innovation with the operational efficiency of a single post-trade environment.
HiPortfolio is DST Global Solutions’s investment accounting and asset servicing solution for investment management operations. It provides full life cycle processing, including order capture, trade confirmation, transaction processing, accounting, financial analysis and tax reporting, for a range of instruments and tax jurisdictions. AST talks to Geoff Harries and Chris Lord of DST about how solutions such as HiPortfolio are responding to industry needs, the challenges of real-time, and visibility in the industry.
What challenges do you face when convincing firms to switch to a real-time model?
Chris Lord: When moving to real-time, more than just the technology needs to change—processes, governance and skills are all affected. The end client experience is also important to consider, since third-party administrators may not necessarily want to provide data in real-time. Firms will consider what unique value they want to deliver, when and to whom.
How can HiPortfolio help third-party administrators and fund managers?
Geoff Harries: HiPortfolio is trusted at the core of investment operations as a comprehensive, scalable and proven investment accounting and tax solution. The solution goes beyond traditional investment accounting offerings to offer best-in-class asset servicing capabilities in the areas of unit pricing and corporate actions automation, to name but two. Applying HiPortfolio’s broad and proven capabilities will enable clients to increase operational control through transparency, accuracy and consistency, and enable organisations to rationalise operational workflows by removing error-prone manual operating procedures. The breadth of instrument coverage that has built up over 25 years of servicing the global investment management marketplace allows clients to gain significant leverage from a single system to accommodate new investment strategies or market entry.
What is DST doing to address clients’ cost concerns?
Lord: DST is focusing principally on two areas of cost reduction for our clients: reducing the cost of operations and the cost of ownership of the solution. The first, reducing the cost of operations, is being delivered by continually looking at opportunities to optimise our clients’ investment businesses from a process perspective, and also leveraging capabilities that sit within our core application, rather than the cost of maintenance in supporting satellite systems. The second, the cost of ownership, is being addressed by enabling our clients to outsource activities to DST so they do not have to maintain application-specialist knowledge. This means that we can assist in streamlining upgrade planning and regression testing.
Do you think visibility and control have improved, and what else is there to be done?
Harries: Visibility and control have been increased over the last two years, both internally within organisations, and also at the macro level in terms of regulators asking for greater transparency. This enables them to have visibility and, therefore, control in the name of stability of the financial systems. While internal projects have delivered visibility and control across projects, such as exposure management, we are beginning to see some of the regulatory changes come to fruition.
In July 2010, we saw the US Dodd-Frank Act signed into law. Two years on, we are seeing the implementation of that legislation. Control is taking the form of using central clearing to clear OTC trades, while visibility will be provided to supervisory authorities by trade repositories that will receive defined information within prescribed deadlines from counterparties to trades. Dodd-Frank and the European Market Infrastructure Regulation are acting as a blueprint as the commitment of the G20 countries is delivered, with other countries, such as Australia, China and South Africa, at earlier stages of the reform process.
What capabilities are you looking to extend at DST?
Harries: The strategy that we are following will continue to execute in three main areas, focusing on investment vehicle coverage, reducing operational costs through increased operational efficiency and supporting our clients’ service innovation. In support of this, we are specifically looking to deepen our unit pricing capabilities in the area of exception processing, develop accounting system requirements that spin out of the adoption of OTC reforms, and deliver to our clients corporate actions automation capabilities that are built on our newly announced alliance with XSP. We are also seeing a trend towards a greater need for data aggregation and visualisation across the middle office, combining investment, performance and risk information.
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