In our last piece, we said we would talk more about “transactions” being the meta-solution to a swathe of investment industry challenges. We hope this post sheds some more light on what we have been working on and how it could make your life as an investment professional easier.
Breaking free from the slow and expensive past
Our experience tells us that the current systems architecture in investment management is holding back the industry. This has been echoed in many of our recent client meetings. Systems are heavily based on batch processing, primarily producing end-of-day positions feeds with limited real-time capability. Thus, when data issues arise they are difficult to track down and permanent fixes are hard to implement.
We know why these choices were made. We have worked in teams making these decisions (we’ve been around a long time), and they were made with solid reasoning based on the best information available at the time. There was no requirement for real-time data, or at least the cost-benefit trade-off of providing this capability was weighted heavily on the cost side. Investment Managers were generally single region and single asset class, thus meaning a negligible impact of overnight downtime.
Cast your mind back to some of the technological aspects which affected these decisions:
Memory was expensive and so was managed byte by byte. Compressing data down to only the essential pieces of information was the ONLY correct choice.
Storage was expensive. Keeping peta-bytes of information without a regulatory or client imperative was not sensible. It also wasn’t technically feasible to manage this quantity of information.
Processing was slow and search for data was sub-optimal. Finding value from large amounts of data was a twinkle in some research student's eye. When the industry made most of the decisions governing the current technical landscape, Google didn’t exist!!
So, what has changed? Everything. And everything is changing at the same time.
First of all we can now design – and afford – infrastructure which ‘never forgets’ and at the same time is capable of being instantly up to date - and asset managers need this now more than ever. Why?
Increased regulation means, for the first time in some cases, requirements for real-time reporting are no longer a nice to have. Concurrently, institutional customers are demanding reporting with greater frequency and fidelity. Monthly printed reports are no longer acceptable. To satisfy their fiduciary duties they need simple access to complex analytics.
Multi-asset mandates have exploded in size just as pressure on margins mounts. At the same time, investment professionals are wondering why the technology on their smart phone is frequently easier and more enjoyable to use than the mission critical technology they use during their work day. Their end clients ask for the ability to access and interpret their investments as easily as doing the weekly shop online.
What can we do to help?
We started FINBOURNE to liberate the industry from the constraints of the legacy technology. We are concerned that new requirements were being gaffer-taped on as tactical solutions to a systemic issue. With the continual advance of technology, things that were impossible 20 years ago are now commodity offerings. We want to stop upgrading old systems, stop doing just enough to get through current regulatory demands, and instead build the future.
Our core LUSID™ technology calculates holdings on-the-fly from the underlying transaction data, in real-time, every time. All data used and authored in the system is persisted in a bi-temporal store. It can be reproduced at will and its lineage easily determined. That’s what we mean by ‘never forgetting’! We are aware of a few lone prophets (and thanks to those who have got in touch) who have tried to achieve this in the past. Now is the time to connect these initiatives, free ourselves and our clients from the confines of old systems and take the industry forward.
We were impressed with recent comments from Thomson Reuters, one of our investors, on their open platform strategy – “No financial industry player – bank, exchange or service provider – can address all the changes in the market on it its own”. A sentiment we surely agree with. We are also emboldened by recent articles in the press underlining the importance of the adoption of newer technology* and a growing number of industry “self-help” initiatives, for example the IBOR Standards Working Group.
If you agree or just want to find out more, we would love to chat (and we have biscuits). You can email us at firstname.lastname@example.org
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