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Portfolio accounting
systems vendors experienced a resurgence of interest from
asset managers in 2005 following five years of slow to
non-existent sales activity. Those firms now assessing portfolio
accounting systems will see familiar names, but several
vendors have modified their underlying technology while others are offering different functional footprints.
Vendors have also globalized their sales efforts; Eagle and Advent,
for example, are selling to European
firms, and SimCorp is targeting the US market.
Vendor risk should remain a
concern, but, given a five-year sales drought, vendors have
proven remarkably resilient; only four systems are no longer
available. SunGard no longer sells Port and Portfolio One;
IDS and ITS both were acquired, and their portfolio
accounting products are no longer sold. Other ownership
changes include SS&C’s acquisition of FMC and Linedata’s
acquisition of both Beauchamp and GIS.
Five years ago, most portfolio
accounting systems provided an array of non-accounting
functionalities, including modeling, compliance, trade
entry, client reporting, performance measurement and
attribution, etc. Specialized and standalone products,
especially in the front office, have taken the place of
these non-accounting modules. Most systems now focus solely
on accounting, the few exceptions being vendors like Advent,
INDATA and SimCorp, which provide comprehensive
front-to-back systems.
Despite reductions in staff (a
necessity to preserve financial viability during the sales
downturn), vendors have been moving to update technology and
are focusing on core accounting functionality. Even with
reworked technology most still have ugly GUIs, and many have
limited query capabilities. Firms have responded by adding
specialized reporting systems. From an accounting
perspective leading vendors have enhanced fixed income
processing and are offering workarounds for some
derivatives, such as interest rate and total return swaps,
but most still lag in providing fully automated derivatives
processing capabilities.
Vendors have made little
progress in areas where Cutter would like to see new
capabilities – workflow functionality, exception processing,
and data collection and integration architecture. The few
firms that provide these capabilities do so because they
already have other products with the capabilities.
Large asset managers have
abandoned the idea of single-vendor solutions and now
surround their accounting platforms with best-of-breed OMS,
data warehouse/data hub, performance and reporting systems.
This change has benefited accounting-only products, such as
Eagle, DSTi, PAM and Camra. It has also played to the
strengths of the outsourcing providers. Large custodian
banks that offer outsourcing have primarily focused on
back-office functions and are offering systems they own
(PAM, Eagle) or are providing solutions from traditional
vendors, such as DSTi. Given the accounting-only
requirements, many asset managers now include outsourcers
when considering a replacement to their back office.
Several portfolio accounting
systems vendors have modified their delivery options. Some
are providing their systems as ASPs, and others are offering
BPO services. Thus, while the vendors remain the same,
whether via standalone systems or through outsourcing and
ASP options, investment firms have a broad range of delivery
choices. With the inclusion of outsourcing, multiple
delivery options (ASP), and the increase in integration
points among components, the decision regarding portfolio
accounting systems has become more complex.
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