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Managers sweeten services with IT

For some investment managers the ubiquitous acronyms are already in place to accompany the IT packages springing up to meet demand in client communication and value added
services. For others it is a work in progress. But as every manager acknowledges, once the technology is out there it doesn’t pay to be left behind when pitching for business.
Once started though, a fine balance needs to be struck between innovation, core competence issues and the relaying of information to clients with self sufficiency on their minds.
Sander van der Zwan, head of the product and knowledge centre at Rotterdam-based investment manager Robeco – a long time investor in IT client initiatives such as the Robeco Centre of Knowledge (ROCK), says the house has adjusted its focus over what it now provides to clients.
“We are no longer selling investment systems to clients. At first we did this as a trial for a couple of clients and saw that a lot of clients were interested.
“We decided though that if we wanted to do this properly we should do it as part of a joint venture with a software company, because you can’t provide all the clients with the systems and the help desk, etc, which is not a core competence here.”
Van der Zwan says for the time being Robeco is not doing this, preferring to focus on the systems for investment knowledge such as risk and performance calculation and the translation of this knowledge into programmes, which he says is a clear client demand.
“We are very active in explaining methodologies to clients and how to translate them into systems.”
Robeco also carries out seminars on performance measurement and risk using workshops to do the practical work with clients and the systems on their analysis and use.
“We consult with clients over how to programme the system and connect the IT and investment management parts. For one central bank client we advised them on building a performance measurement system, all they have to do is build it and link it to their administration.”
For investment management, the company provides the RIAM (Robeco Institutional Asset Management) communicator to clients via which they can look online and see their performance and analyse it against the benchmark or study all trades passing through the system.
Van der Zwan says Robeco seeks to charge cost price for the system – around E20,000 per annum.
“This is the official price, but it is often negotiated and included in the fee. We’ve looked in the market and this seems to be about half the cost of other systems,” he adds.
Going forward, he believes reporting is set to become a key issue and says that consequently Robeco is developing its own reporting engine product.
“The machine will be available by the end of the year for automatic reporting. The client will be able to push a button and automatically a client specific report will be generated. In terms of client settings, these will be negotiable at the start of the contract and could include performance figures, portfolio build-up, benchmark information, risk and trades.
“The target time for producing the information is three days and there will be a connection to the RIAM communicator and then information can be downloaded from the web.”
He also notes that it is often easier to produce the systems in-house than externally: “Sometimes you can buy in technology from outside suppliers, but for investment systems we almost never find any that do exactly what we want. The reporting engine is easier to build ourselves and get the best connection to the back office.”
Similarly, he feels the competition in the area is increasing: “What we are seeing is more and more competition to the RIAM communicator electronic system. A lot of custodians are providing automatic online reporting systems. We expected this though and if they provide better systems for less money then we do, we might not do this any more.”
Johan De Ryck, manager of institutional assets and investments at Brussels based KBC Asset Management, says the quant risk focus of the company as well as the administration capability for Belgian 401k type plans, involve a number of IT software packages: “These are installed on client computers – for example, the 401k package is accessible to each employee to input investment decisions, product choice, insurance, and also scenario building.”
As for reporting, KBC’s IT back office system (IPM), which produces reports in several languages on performance attribution and analysis is set to go on-line shortly: “We’re getting there. In the third quarter of this year we will have a system ready where we will be doing the client reporting electronically if the client so wishes. This will be available by a special key and we are working on the security element at the moment.”
De Ryck says this will include information ALM models, tracking error and information ratios for benchmark establishment: “We’re already very quant driven here but we’re finding the clients are asking for more electronic reporting,” he notes.
The group is also finishing the KBC asset management web site to signal its division from the parent banking group. Viveka Ekberg, head of institutional asset management, Sweden, at SEB in Stockholm, says the firm is working on its ambition to provide a web based real time reporting structure to clients. “There is a project in place working at full speed. We will do this on a step-by-step basis – firstly focusing on the content of our paper reporting and then transferring this on to a web-based solution. We already focus heavily on the value added aspect of this paper reporting and in our mind how you get this to clients is just a question of different distribution channels.”
Work is currently under way with the group’s internet banking operations to ensure operational synergies. “I think the important thing is that we consider this to be a crucial part of our services. Our aim is really to be able to provide our clients with a platform so that they can decide at any time to go and have a look at their portfolio and do their own type of analysis. The reporting intervals will become irrelevant.”
Ekberg sees the web solution as a further platform for other value added services: “You can provide all sorts of interesting research pieces or carry out on-line conferences, but we need to take this step-by-step.”
Michel Levenez, responsible for investment reporting at CDC asset management in Paris says it has been sending its reports to clients by e-mail for several months now on a weekly and monthly basis, although he says client still prefer three monthly reports on paper.
He says CDC’s internet site also provides monthly reporting on its range of funds in English, French, German, Italian and Swedish – amongst others, adding: “For the rest, we are working on it and want to get a weekly reporting system at the press of a button on performance, risk, Sharpe ratios – basically all the things we can calculate from stock exchange values.”
Levenez says CDC will have internet provision for around 100 clients in three to four month’s time giving information on products, asset allocation, interest rate issues and market sensitivities. “We are also going to make available our future predictions on the market as much as we possibly can.”
Nils Elmo, director of client services at Copenhagen-based Unibank Investment Management, points to the group’s ‘Panda’ data analysis system as its communications link to clients: “The system presents the normalised data we have available here. Clients know it as Panda and it was developed in conjunction with them and has been in operation for a year and a half.”
Elmo explains that Panda incorporates the reporting and accounting as well as a strategic investment planning service, involving regular dialogue with institutional clients: “Market risk information, expected return figures and structural figures – basically all the things that can be captured through our investment processes we keep track of and supply it to our clients, specific to their portfolios,” says Elmo.
He notes that clients are asking for this on a more regular basis than the present monthly e-mails which are sent out: “For market risk, estimated tracking error and historical performance data we have plans to develop an intranet connection where clients can consult on-line when they want.”
Elmo says the system will compliment the real time access currently clients can get price and currency surveys or information on Unibank’s performance and trades.
“The principal behind everything is that the information we get the client can get at the same time.”
However, Elmo says Danish investment culture ensures that the bank does not patronise its clientele: “We do not give out information to clients on how to use our investment process and run their own portfolios – they already know about that. We do provide the concept for strategic investment planning because some of the pension funds in Denmark come from a very domestic investment background, whereas around 50% of investment is now outside Denmark. Clients don’t want to be educated, so it’s more of a dialogue taking place.
“The price for the system is client specific and depends on the complexity of the information required,” says Elmo. “For large pension funds it is in the region of one or two million Danish Krone. However, the client often wants to put these things together with the fees and they are mostly quite successful.”

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