Improving margins in investment management

Low margin is the reality, COVID-19 only makes it worse

The buy-side industry has gone through ups and downs in the past few years. In 2016 it had the first decline in global revenues and profits since the 2008 crisis. In 2017 it rebounded with record-breaking performance backed by bull markets which continued to the end of 2019. Everyone thought this would carry into 2020 and beyond, until the COVID-19 virus stormed the global markets. 

Regardless of the revenue performance in the past years, margins continue to be under a great deal of pressure. This is especially true for the firms with AUMs in the middle of the spectrum. A firm needs two things to be successful in a low margin environment. The first is being more efficient and scalable; shifting from active management to passive management and maybe offering ETFs. The other is to be better in exploring alpha from alternative investments, unique regions or specialty instruments. As a result, changes in business, operation and technology is inevitable; and the time is now.

Optimize target operating model (TOM)

At the highest level, a TOM is about how it is organized, how it connects with customers, how it processes data and how it applies technology. We have a proven methodology to optimize  TOM to support your shifting business direction. We gather key business challenges and constraints from stakeholder interviews, and evaluate the relevant areas of the operating model against industry reference models and with our unique views from prior working experiences. We will then identify key areas for improvements that require process, staff and technology changes. Through a series of workshops, participated by stakeholders, our team will build out a future TOM, an architecture, investment requirements with priorities, an execution roadmap, a change management plan and key risk mitigations. A typical engagement of TOM analysis will cover the key functions such as:

  • Sales and client management 
  • Research and Investment Idea generations
  • Portfolio construction and management
  • Order management and trade execution 
  • Reference and master data management
  • Risks and analytics
  • Portfolio accounting
  • Compliance and monitoring

Our Unique Approach

Our senior practitioners, with deep domain expertise and technology know-how, will  tailor   an industry reference investment management  operating model to meet your unique business drivers. Our proven methodology takes a balanced view of operational efficiency, technology readiness and risk mitigation. 

The length of the engagement depends on the breadth and depth of the business scope and the availability of stakeholders and key artifacts, such as:

  • Operating model
  • Process maps with roles and responsibilities
  • Organization structure 
  • Architecture maps 
  • Third party services obligations

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