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Fund Technology Issue 5: Unified Systems are Better

The following article originally appeared in Fund Technology Issue 5


Money managers allocating capital to external funds historically used different tools for each function. There was one product for accounting and another for risk, along with a third for portfolio managemen
t and all the way through the entirety of a fund’s infrastructure. For a time, this approach worked because it was the only approach available short of building an entire system in-house.

Over time, end-users realized the deficiencies of this approach. Moving data between systems is painful, and it can be hard to see the full picture with so many disparate modules. Today, technology providers are offering unification. Streamlined and combined products provide tangible benefits to both the buyer and seller. Here are three reasons why technology systems are stronger together:

1. Single screen solution
Technology providers are now offering more services in one screen. This is both an effort to grow revenue from existing users and a response to client demands. Similarly, vendors have found that servicing clients with data support and light outsourcing of mundane tasks improves the utility of their systems and allows users to focus on intellectually rigorous tasks to gain the most value from the tools provided.

2. Big Data, big problems
“Big Data” is only powerful if the information can be quickly and reliably collected, organized, and employed for analysis. As the flood of data across all components of the investment process has increased, it is more difficult to capture data elements.

Separating signal from noise, and seeing nodes and trends emerging across all data points requires infrastructure and support can be hard to find in an evolving datascape. Separate systems struggle to meet more holistic investor and regulatory requirements. When systems are segregated, even if a full data set and good data analysis tools are encompassed in the system, the interplay between elements used for say, risk, and those needed for accounting do not intertwine. This presents a problem when investors require risk calculations that include operational risk and liquidity risk, which reside in accounting or portfolio management tools and not the risk calculator.

3. Collaboration, not isolation
Holistic systems make the entire team better. There is a tendency among insecure employees to hoard information. This stems from a misguided interpretation of the adage “knowledge is power.” In the information age, data is not knowledge. Knowledge is having the skills to make good use of data. Knowledge is collaborating with a team to develop insights beyond what a single user can produce. To facilitate this new knowledge, systems that can bring previously separated functions together, and allow for insight and collaboration are more valuable than simple calculators and visualizers. The vanguard of the financial technology industry is realizing and supporting this need. Laggards are hanging on to legacy services that fill a specific niche.

Making the leap
Once organizations understand the benefits of a unified system, they frequently want a single screen the next day. For many complicated investment firms, the reality is not so easy. It requires a real leap of faith on behalf of the buyer. The risks of failure are higher, the behavioral challenge of changing routines is steeper, and implementation can be longer. Vendors must be thoroughly vetted to form a partnership based on trust and mutual commitment to success.

Shifts in technology are rapid. The migration away from being the best-in-class for one purpose to the need to be best-in-show for holistically serving an industry segment has only emerged in the last few years. This trend will continue, and both vendors and clients need to adapt and evolve with the technological advances evolving to meet today’s databased landscape.

Despite challenges, the benefits of using an integrated system are worth the risk. And the cost of entropy may be higher if competitors are adopting single screen technology while fear of change mires multi-system firms in the past.

Topics: News

Brian Robinson
Written by Brian Robinson

Brian joined Vidrio in 2015 to lead sales and marketing activities. Brian has worked both as an analyst on a fund of hedge funds, and has helped implement enterprise risk and technology systems to some of the largest hedge fund allocators in the world. Prior to joining Vidrio, Brian was a Sr. Sales Executive at MSCI RiskMetrics on the hedge fund transparency team. Brian served as Sr. Analyst at J.H. Whitney Investment Management on both Asian and Commodity FoHFs. And Brian spent seven years at JP Morgan in sales and analytic roles. Brian has a Masters in Finance from the Zicklin School at CUNY Baruch, and a BS in International Relations from Colgate University (Go 'Gate!).

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