A recent Northern Trust survey, which polled 300 asset managers around the world including 30 per cent from the Asia-Pacific region, has highlighted an increasing trend for asset managers to outsource front-to-back office operations in order to optimise their operating models, gain operational resiliency and improve bottom line performance.According to the survey, 40 per cent of the Asia-Pacific based asset managers, are considering outsourcing their middle-office and investment book of record functions, allowing them to focus on alpha-generating returns and solutions that provide greater scale, flexibility and speed to market. As fee pressures continue to grow and margins shrink, firms are examining their core functions in order to concentrate on enhancing business performance.
A front-runner of this trend, Conning Asia Pacific Limited (CAPL), a specialised investment manager based in Hong Kong, outsourced non-core, high-capital intensive investment operations functions to Northern Trust in 2019.
Caroline Higgins, head of Global Fund Services, Asia at Northern Trust, says: “CAPL is an example of an innovative firm which carefully considered its target operating model and has continued to stay ahead of the curve. They outsourced their middle-office operations to us ahead of the pandemic, and as a result are successfully positioned to meet both the current and future economic climate. The COVID-19 pandemic has further encouraged many asset managers to focus on the optimal operational model, enhancing efficiency and reducing cost, leading many of our clients to consider outsourcing their front-to-back or whole office operations. We anticipate this trend to continue as providers move up the value chain to drive growth.”
Bo Kratz, chief executive officer at CAPL, says: “By outsourcing these functions, we are able to better focus on our key competencies and investment performance whilst reducing risk and improving our overall operational efficiency. We have been impressed by Northern Trust’s ability to integrate their middle-office technology to our order management system, along with their operational and servicing capability; and investment performance analytics and reporting. The resiliency of Northern Trust’s operating model and their staff’s seamless collaboration were essential, particularly during the recent period of market volatility, and ensured our operations continued to run smoothly.”