The majority of fund managers who outsource their investment management process to software providers do so in order to concentrate on their core business focus, according to research commissioned by SimCorp.
The research, conducted by the consultancy firm Investit, found that 73 per cent of fund managers outsource back office tasks so they can focus on managing money. Cost was not a major issue in the decision, according to Investit.
The findings were based on 40 interviews with investment managers, services providers and software vendors.
For managers who chose to insource the investment management process, 58 per cent said the key reason was to retain flexibility and agility.
SimCorp Australia managing director Peter Hill said that whether a firm decided to outsource the process or keep it in-house, the headcount within the company remained the same.
Companies tend to retain staff when they outsource their investment management process to check the data they receive from the outsourcer, Hill said.
Fund managers also believe there will be fewer outsourcers in the future due to consolidation in the industry, with 43 per cent saying that consolidation is “very likely” and 57 per cent saying it is “likely”.
“Fund managers need to focus on having the right technology platform to meet their specific requirements and to enable their growth. So cost is not such an issue, because in the end the headcount starts to draw together as people retain operations in-house,” Hill said.
SimCorp Australia currently provides investment management services to institutional investors such as Macquarie Funds Management, Vanguard, Victorian Funds Management Corporation and Challenger.
SimCorp could soon be branching into providing services to superannuation funds, with the consolidation in the super industry potentially leading to funds managing money in-house rather than providing mandates to investment managers, said Hill.
“[Super funds] primarily need to develop the skill of the people who will be managing the money, but they need systems in place to support that. SimCorp is tending to support the larger institutional managers, but we do see opportunities as superannuation organisations look to bring those capabilities in-house,” he said.
