Almost all large fund managers will outsource investment research organisation duties to third-party providers within the next two years, a new survey has found.
According to the study commissioned by US-headquartered firm MackeyRMS, about 75 per cent of the 100 asset managers covered in the survey already use a specialist investment research management system, split between outsourced (57 per cent) and home-built (17 per cent) services.
“Among the asset managers that don’t use a dedicated platform today, 96 percent said their firm was likely to extremely likely to evaluate adopting a third-party system in the next 24 months,” the survey says. “All respondents from asset managers who built an in-house system said the same.”
MackeyRMS, which recently established a base in Australia, provides software-as-a-service (SAAS) to fund management firms designed to “optimize the way analysts and portfolio managers generate, share, debate and act on investment research conducted for actively managed portfolios”.
The group hired independent consulting firm, Market Measurement, to conduct the study earlier this year, compiling the results in the ‘2020 Investor Survey: Modernizing Research Management’ report.
While software designed to help fund managers organise investment research has been around in one form or another for a couple of decades, the MackeyRMS survey found almost half of respondents had only adopted a specialist system within the last two to four years.
About a third of surveyed firms had moved to a formal investment research platform in the last two years while only 18 per cent had a system in place for longer than four years.
“Of the respondents who are not currently using a dedicated research management platform, nearly half (42%) said improving compliance tracking of investment ideas was a top priority for their firm’s research management process,” the report says. “The same percentage of respondents (42%) cited the need to increase collaboration on research ideas as a top priority. And 38 percent of respondents said that improved data security and the need for greater efficiency in how research is captured and consumed is a top priority for their firm.”
Roughly half of fund managers already operating on third-party software platforms cited better security, improved workflow efficiency and less time “spent looking for investment research” as reasons for outsourcing.
The study found some differences between long-only and long-short fund managers in how and why they used investment research systems. Larger managers (US$20 billion plus) in the study were also more likely to rate “work from anywhere” capabilities as the reason for choosing third-party services.
In a release, Chris Mackey, MackeyRMS co-founder and CEO, said the value of cloud-based SAAS investment research management tools “has rarely been as apparent as it has been during the last few weeks, with organizations having to quickly shift to working from home in the wake of recent market disruption”.
He said the survey revealed the global asset management industry was already well-advanced in upgrading investment research systems.
“The drivers for this change — the need for accessibility, transparency and work-from-anywhere usability — are consistent with other front office modernization initiatives undertaken across the investment enterprise in recent years,” Mackey said.
He said feedback from the Australian and NZ fund markets also reflected an “appetite to modernise the front office of asset managers and asset owners in the region that has been perhaps the strongest we have seen globally”.
MackeyRMS has already made inroads into the Australian market with a number of NZ managers also in discussions. Typically, the service – costing a minimum US$25,000 per year – requires an investment team of at least five to achieve benefits.
Launched in 2011 by “veterans of the hedge fund, enterprise software and cloud computing industries”, MackeyRMS targets active managers. To date, investment firms with a collective US$2 trillion under management use its system, according MackeyRMS.