A new set of enterprise level trading systems has been added to the marketplace with much more reasonable price points. Funds that have been holding off on implementing an enterprise-level system to manage their Execution Management ("EMS"), Order Management ("OMS"), Portfolio Management ("PMS"), Fund Accounting and lite Risk requirements should consider re-examining the market for the best options. Despite the lower price point, these applications offer robust core functionality for funds with moderate trade volumes. These systems also offer true straight through processing (“STP”) for many types of equity focused funds. FinServ is seeing an increase in its client base of hedge funds looking towards more cost-effective Portfolio Management platforms.
The majority of these offerings are coming from new software firms in the marketplace. Historically, the biggest challenges of implementing software from startups, or relatively new firms has been a lack of maturity, or the inability to cover certain asset classes. Since many systems were built for one specific fund’s assets or business approach, it often proved far too challenging to take the software that worked well for that one fund and extend its functionality to cover the multiple asset classes and potentially higher volumes that a more complex or larger fund would have. While some of these challenges still exist, and you have to assess each new product independently, many of the latest offerings have passed FinServ’s intensive vendor selection reviews.
Our clients are finding that the cost savings are compelling enough to choose an up and coming software provider over the old stalwart trading platforms that come with a very high price point and here are some typical price point differences we are seeing:
The majority of FinServ’s clients that have a long/short strategy or are lower volume shops, are a good fit for these new solutions. The following topics highlight key areas that will indicate if your fund is a good fit for these systems:
Product Mix - Historically, derivative and hedging, or more exotic asset class support were missing in the newer software choices. Now, the asset class and derivative coverage exist from the majority of these vendors. It is important to note that, as these companies mature, there is some flexibility and patience required, as the asset types are expanded. However, for many of our clients, the cost savings are worth the investment and time required as new functionality is built out.
Trade Volumes - High trading volume shops are not a good fit for these systems because these newer systems cannot currently support the performance demands of the very high transaction flows. However, for funds with trade volumes between 10 and 200+ trades on a weekly basis, who do not trade exotic asset classes, these funds are a good fit for the newer systems in the marketplace.
What is Driving Funds to Require a Portfolio Management System
A number of our clients are anxious to move off Excel, as they see Excel-based systems as a major operational risk. The move is being driven by funds who don’t like to rely on their administrator for reporting that is critical and urgent to their day to day operations. Historically, funds with anything but a very simple mix of asset types did not have many options besides the high cost of systems like SS&C’s Geneva. Now, these funds can choose from a handful of well architected and efficient platforms that can support: Execution Management, Order Management, Portfolio Management, Fund Accounting, lightweight Risk Management & Compliance, as well as Reconciliation functions all under one application.
In the following case study FinServ highlights one of our most recent clients who made the move to a new system:
How FinServ Can Help
An experienced integrator can make a huge difference in your implementation. Pointing out areas like where you can save significant costs with your software provider is just one key area where the right partner will make a massive difference to the success and ultimate cost of your implementation. A partner like FinServ will also make sure you consider all aspects of your business. It is important to not only consider existing needs but also understand where the firm may be headed in the future.
Our clients have found significant benefits in both cost savings and overall operational efficiencies through implementing many of the new Trading Platforms. Even smaller funds now require in-house systems and have a strong desire to eliminate external reporting dependencies. The greatest barrier against undertaking a project of this size and complexity is often the availability of key staff. FinServ has the capability to provide investment fund best practices, subject matter expertise, and a hands-on approach, to ensure your project can be implemented successfully without jeopardizing the daily and monthly responsibilities of key staff.
Strong project management and a tried and true systems integration methodology are also critical to a successful systems implementation. In the past 12 years, FinServ Consulting has saved our client’s millions of dollars by delivering each project we perform, on time and on budget. While the new software companies have strong technologists and architects, they still lack a focus and expertise in core project management and often get distracted trying to manage too many clients at one time. Our clients usually run very lean and having a member of their firm shift all their responsibility to a full-time project is not feasible. By having a consultant who is dedicated to the project and stays on top of all open items including managing the software vendor, we find that projects are completed in a fraction of the time of other implementations where no dedicated consultant is utilized.
Our team can help you determine if you are a good fit for one of these systems and help to estimate the costs and time for your implementation. Contact us at firstname.lastname@example.org for more information or use this link to fill out your information and we will follow up with you immediately.