Jon Chandler
Director, Research
Jon Chandler has 20 years of experience in the financial services industry. Prior to joining Cutter Associates in 2014, Jon was a senior business analyst for State Street Global Advisors (SSGA), where he was involved in a number of projects for the front and middle office, including UAT design and execution for an order management system (Fidessa IMS), the implementation of a web-based due diligence platform (FundInsight), and an enterprise solution to support blended benchmarks. Prior to his project roles, Jon was a principal in fixed income trade operations at SSGA. He has extensive experience with post-trade operations and applications, such as OASYS/CTM, PORTIA, MBSExpert, and FailStation. Jon earned a bachelor of arts in history from the University of Florida and an MBA from Northeastern University.
Recent research assignments and publications include the following:
- Alternative Investment Systems
- Cutter Benchmarking: Alternative Investments
- Cutter Benchmarking: Derivatives and Collateral Management
- Cutter Benchmarking: Investment Risk
- Cutter Benchmarking: Performance Measurement and Attribution
- Derivatives and Collateral Management Solutions
- Execution Management Systems
- Managed Data Services
- Order Management Systems
- Outsourcing Solutions
- Performance Measurement and Attribution Systems
- Portfolio Analytics Solutions
- Private Debt
- Risk Management Systems
- The Evolving Front Office Support Model
Chanelle Crabtree
Consulting Principal – Investment Operations and Outsourcing
Chanelle Crabtree has extensive experience consulting for the asset management industry in Australia for the past 20 years. Chanelle has considerable knowledge and expertise in investment management, outsourcing, and the development of operational models that support the investment management lifecycle. Chanelle leads Cutter Associates’ Investment Operations and Outsourcing practice, and oversees Cutter’s Australia office. She has decades of experience working for investment management firms, custodians, and consulting firms, in roles that included middle-/back-office operational, business analyst, project management, consulting, and senior management. She has a deep understanding of investment management, covering the operational, governance, and system requirements to support all types of clients, products, and asset classes.
A former Director at Deloitte, Chanelle led key engagements, particularly for complex clients with diverse asset classes, covering target operating model design, sourcing, and implementation. Prior to Deloitte, Chanelle was a Lead Consultant at Morse Consulting Pty Limited, where she led various engagements that covered target operating model design, sourcing of custodians/systems, and implementations with investment managers and superannuation clients.
Tom Phipps
Consulting Principal – Front Office
Tom Phipps has more than 25 years of experience in the investment management industry, with a background in the automation of the investment process, including portfolio management, risk analytics, trading, compliance, performance, operations, investment accounting, data management, and systems integration. He leads Cutter Associates’ Front Office practice, providing deep expertise in front-office vendors and operating models. His consulting experience includes strategic advisory, systems selection, and change management execution engagements for some of the world’s most prominent investment management firms. He also leads the development of Cutter’s Strategy and Search methodologies.
Tom gained his expertise in technology and operations at software vendors and asset management firms, where he held leadership roles in technology management. His prior experience includes Senior Manager at Deloitte Consulting, Chief Technology Officer at PanAgora Asset Management, Chief Technology Officer at Atlas Venture, Vice President of Operations at DSTi North America, and various management roles in technology and professional services at NCS Financial Systems (now SunGard AMS). Tom holds a bachelor’s degree in operations management and management information systems from Florida State University.
This next decade will bring significant change to our industry, forcing many asset managers and asset owners to transform their operating models to adapt to these changes and future-proof their businesses.
Although most firms understand this, they may not realize that they also need to alter their way of thinking, as many of these discussions about transforming their operating models are still based on, or limited by, outdated constructs. There are more options now, and outsourcing could be one of them.
While the solution may still involve decisions related to all-in-one versus best-of-breed, or whether to outsource or not, the discussion (or perhaps debate) has now evolved ─ and it’s no longer one-dimensional. New opportunities for transformation have emerged, involving flexibility, interoperability, and optionality.
For the consumer, what this all means now is choice.
Under Pressure
Our industry is changing, and today’s low-interest rate environment is pushing asset managers and asset owners toward more complex assets, which test the capabilities of legacy systems and put strain on existing operating models. At the same time, external pressure adds another layer of complexity, with increasing demands from regulators and heightened expectations from clients and boards in terms of cost, performance, and transparency.
Asset managers have been facing industry-wide fee-compression for some time, as more investors are favoring lower-cost passive strategies over active management. This puts a strain on margins and increases the focus on controlling costs. To compete and to achieve growth, asset managers need to develop new products or expand through mergers and acquisitions. According to a report by the investment bank Piper Sandler, by 2030 attrition and consolidation are expected to reduce the number of asset managers by half. The industry will then be dominated by a small group of massive global firms, with only some specialist managers able to compete in a field of industry giants.
Asset owners have been trending toward insourcing asset management. Allocations to alternatives are increasing in order to meet capital requirements and future liabilities, and increasing numbers of investment boards are looking for more control over their investments, so co-investment and direct investment are on the rise. At the same time, regulatory and solvency requirements continue to evolve.
COVID-19 added to these challenges and exposed flaws in the operating models at many investment firms that have relied heavily on spreadsheets and manual processes that proved inefficient and problematic in a remote environment. Service providers, on the other hand, with various centers of excellence, have generally been able to scale or move work around the globe to minimize COVID-19’s impact, although they face some of their own challenges due to the extent of the pandemic.
A Changing Landscape
While the age-old debate between all-in-one and best-of-breed solutions rages on, and outsourcing remains a controversial topic, the landscape is changing, and investment firms now have various models or choices available when it comes to finding the right solutions approach.
And this is why the conversation has shifted.
Software or a Service?
The lines between software and service providers are blurring. Vendors known for software are extending their managed service offerings into data management, custom reporting, and even traditional areas of investment operations.
Vendors known primarily for their services are now building their own technology stack, while making a series of acquisitions along the way. At the same time, some of these firms are also working together. For example, Bloomberg has entered into partnerships with BNY Mellon and Northern Trust to offer better integration and turnkey solutions for asset-servicing tasks, while BlackRock started this move with Aladdin Provider, giving access to service providers to perform tasks on the asset manager’s system.
Platform Ecosystems
Cloud-based technology has also given rise to platform ecosystems, and this is altering the age-old debate between all-in-one and best-of-breed solutions. In the past, best-of-breed offered innovation and solutions that were fit for purpose, but integration and maintenance grew problematic over time. All-in-one offered a solution, but firms understood that they would need to make sacrifices for the greater good, so they could take advantage of the common data model and simplification that the platform offered.
Furthermore, the term all-in-one was a misnomer from the start. There has never been, nor will there ever be, a single solution that meets all your requirements across all asset classes.
What’s different today about these emerging ecosystems, however, is that they offer the benefits of each approach. The vendor takes care of all the “plumbing” and connectivity, hosting alleviates many maintenance headaches that can lead to version lock, and data can be aggregated and maintained with consistent practices.
At the same time, platform vendors can also offer best-of-breed components and services that are augmented by new opportunities created with an open architecture. An open architecture approach allows the platform to serve as a marketplace that connects the client with other third-party providers. These could be established providers, for example, that offer risk analytics, or fintech startups that the client may never have heard of.
The platform ecosystem vendor does not have to necessarily keep pace with the front office or specialize in any one area to the detriment of others ─ the vendor just needs to connect you with the right systems that fit your needs.
So, What’s Next?
The landscape is changing, with more choices now than in years past. The lines are blurring between software and service providers, and, in fact, some service providers now directly compete with software providers for insourced operating models.
More service providers offer modular solutions and optionality, allowing asset managers and asset owners to decide which functions to outsource and which ones to retain in-house.
As firms consider their future state, the good news is that today they’ll find multiple ways to get there.
Coming Soon
As part of an upcoming series and research report, Cutter will discuss some of the drivers for outsourcing, model options/service coverage, and considerations that you should keep in mind, such as cost and oversight requirements. We’ll also provide an update on leading service providers and how they’re helping firms future-proof their businesses.
In the meantime, if you have any questions and would like to speak with a Cutter analyst or consultant, please contact us at [email protected].