Asset managers to ramp up oversight automation to manage operational risk, according to research

May 29, 2014 - Asset managers are feeling unprepared for future challenges despite already making strides to improve fund oversight, according to a survey of North American institutional asset managers.

The research, carried out by Milestone Group, surveyed leading organizations and showed that 40 percent of respondents felt their current operation was unprepared to meet anticipated regulatory changes and desired an increase in automation. However, approximately 61 percent would not wait for new regulations to arrive before strengthening oversight, as asset managers and trustees make protecting their reputation and the interests of investors their top priority.

Commenting on the findings, Marlena Fitts, Product Management & Marketing Leader at Milestone Group said: "While the industry recognizes the importance of regulation, the reputation they've worked to build is the major factor for firms looking to strengthen their fund oversight functions. An education process is taking place across the market, and it is positive to see that most already understand the need for performing some level of operational oversight of their service provider outputs beyond periodic service level meetings."

Fitts went on to say: "Rather than performing manually intensive tasks like collecting and entering data into spreadsheets to perform checks, organizations need to have a platform in place that centralizes and automates the process of validating key data points from their suppliers, allowing asset managers to focus on analyzing and managing exceptions, often within tight time windows. For all firms that outsource key functions such as NAV calculation, oversight automation is essential to reducing operational risk."

The survey respondents, which mostly involved traditional institutional asset managers, also included wealth managers, pension advisors, and a third-party administrators' middle office operation that provides oversight for investment management clients. The size of the respondents ranged from $4.5 billion AUM to $2 trillion.

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