The asset management middle office—the meat in the sandwich or a growing source of value?

Phil Pietersen
02 June 2020

I have heard it said that the asset management middle office is a bit of a unicorn: you either believe in it or you don’t. I am here to tell you that it is very much real and, more importantly, can be an important source of value for your business.

For many asset management organisations, the middle office is there to support the front office and pass data through to the back office. However, the role of the middle office is evolving as organisations come under pressure from a combination of increasing regulatory focus, lower investment returns, and growing concerns about risk management. Market-leading organisations are making up to the valuable role the middle office can play in helping to manage these pressures.

Coming out of the shadows

Managing these pressures is not the only reason that the middle office is growing in importance. Asset managers are echoing the cry of Sherlock Holmes in The Adventure in the Copper Beaches in their growing interest in data-informed decision-making.

“Data! Data! Data!” he cried impatiently. “I can’t make bricks without clay!”
~ Sherlock Holmes, The Adventure in the Copper Beaches

Having access to data is important but doesn’t necessarily mean that you’re going to make better decisions. One of the biggest problems that we hear from our clients is a lack of trust in data quality and therefore not extracting value from it.  This is backed up by a recent EY report that found 85% of financial services firms see data as their key strategic asset, but only 16% rate themselves strong in extracting value from it.

The middle office can play a pivotal strategic role in the enterprise data strategy of the organisation.

Better investment data equals better investment decisions

Investment is fundamentally about confidence. From individuals placing their hard-earned savings into a fund right through to the analysts and managers driving investment portfolios, it is about being able to trust that people are making good decisions based on clear and accurate data.

We have all seen or even been part of data projects that fail to deliver on their promise. As the level of frustration grows, data repositories and reporting tools start multiplying. This proliferation of workarounds and subsystems inevitably leads to increased risk, wasted effort reconciling differences.

One solution that many asset management organisations are implementing to unlock the value of their data is an Enterprise Data Management (EDM) platform. An EDM  platform can unlock the value of the data flowing through the organisation and can deliver, amongst other things:

  • A centralised repository that can be accessed by all parts of the organisation with appropriate controls and security in place
  • Easy integration into upstream sources that can take the pain out of collecting and reconciling data
  • A single source of data for downstream applications and external parties
  • Improved data quality through real-time oversight
  • Access to data analytics and data visualisation capabilities
  • The ability to incorporate new sources of data, including more complex and unstructured data
  • A greater ability to manage business and investment risk and satisfy regulatory requirements
  • The agility to easily introduce new applications and support new products as the business grows and its needs become more sophisticated

Once your organisation successfully implements an EDM platform, you will be able to take feeds from custodian banks, market data providers and internal teams, and bring it all together. Your data can be enriched, validated and available for your teams. Business users will be more likely to trust the data and consequently more ready to engage with the data in the course of their day-to-day activities.

These capabilities can be the difference between staying ahead of the competition or falling behind.

No more ‘Middle Child Syndrome’

The middle office is perfectly placed to become the guardian of the organisation’s data and where much of its potential value can be realised. The implementation of an EDM platform will mean that it no longer has to suffer from ‘middle child syndrome’, the belief that the middle child is excluded, ignored, or even outright neglected because of their birth order.

At AlphaCert, we put you in control – control of your middle office and control of your data so you can have the confidence in the data to make high-quality investment decisions. Get in touch now for a personalised demo.

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