What the specialists say

We asked industry experts about the future of global fund services and innovation opportunities to strengthen investment decision-making.


In which areas of global fund services will technology investment deliver greatest advances over the next three years? What are the key components to building an efficient, event-driven funds architecture?
Some of the biggest advances will be in how technology will transform the servicing of investment data. Digital technology will help transform raw data into valuable information that decision-makers across our industry can use to benefit their businesses and validate their decisions across both their front and back offices. 

This will play an important role in ending reliance on outdated legacy architecture on which much of the funds industry still operates today – from mainframes and batch overnight feeds to reports and electronic faxes. Digitalising these processes will offer transformative benefits for asset management clients and their investors by moving from inefficient, manual investment processes to enable powerful new user experiences. 

This means, for example, enabling an investor to visualise all their investments in a single place, or providing a distribution team with the real-time valuation status of every single investor in their funds. We have developed our enhanced digital technology platform, Northern Trust Matrix, to help our clients embrace this power of digitalisation and we are working to roll out its functionality for our European transfer agency clients. 

At the same time, we are investing in Northern Trust Whole Office. This is an advanced open-architecture, multi-asset class solution that integrates proprietary architecture with innovative partners to provide our clients with access to new technologies and capabilities across areas such as strategy and trading, operations, data and digital, and analytics. 

Whole Office and Matrix are complimentary in delivering advanced capabilities that collectively span an asset manager’s business. Whole Office delivers advanced technology solutions to facilitate decision-making across the middle and front offices, while Matrix’s focus on delivering real-time accurate investment data constitutes back-office transformation and will support the complete value chain of our asset servicing products.

Changing client expectations
Asset managers are demanding accurate, real-time investment data to inform their decision-making across areas ranging from portfolio management to distribution. 

While there is no shortage of information available to asset managers today, the ability to provide it to clients in meaningful, intuitive forms – rather than in a deluge of raw data – is increasingly central to the variety of roles performed by the asset servicer. 

We also observe an evolution in how asset managers are using outsourcing to focus more exclusively on ‘core’ functions such as portfolio management. From our position as a global custodian and asset servicer, we see some managers outsourcing up the ‘value-chain’ – including outsourcing functions such as their trading desks, foreign exchange or transition management capabilities. In some cases, this includes moving towards full outsourcing of all front-office capabilities. This has enabled our clients to focus on core alpha-creating activities of their own.

In promoting a successful event-driven funds architecture, again data is central to success. It is critical to arrange architecture to deliver accurate, reliable, real-time data utilising the power of digital technology to be more efficient in terms of how it is processed and delivered and how clients can consume it. 

It is not enough simply to build a portal on top of a legacy solution. Rather it means moving away from obsolete legacy systems that maintain duplicate records of the same information in lots of different places. 

You need to build an architecture that captures every transaction upfront and delivers a single, ‘golden’ record of that event that can be used by you and your clients in the format they wish. 

As an asset servicer, getting that data foundation right opens up future opportunities to deliver products and services to clients to support them with the challenges and opportunities that are most critical to them. It creates a well-constructed end-to-end architecture, where change becomes rapid, responsive and relevant to our clients’ future needs.


What role do technology partnerships play in delivering efficiency gains in global fund services ? How do these translate into greater value for asset management clients?
Effective partnerships with fintechs and other service providers can be a real game-changer, enabling us to offer our clients enhanced user experience and product innovation as well as the benefits that come from platform mutualisation, process harmonisation and the latest technologies.

Partnerships, and more broadly business cooperation, can help solve age-old industry issues. The seamless integration of front, back and middle office is an excellent example of what can be achieved through collaboration between providers. Last year, we partnered with BlackRock Solutions’ Aladdin Provider ecosystem, bringing together our back-office and post-trade services with Aladdin’s front and middle office. What this means in practice is that we operate on a shared platform and workflows with our clients, which reduces duplication of data models, communication breaks, operational risk and therefore increases efficiency throughout the process. 

Another area that can be complex is fund distribution, where fund buyers and manufacturers have to enter into different contracts, interface with different systems and manage separate processes in multiple locations. 

Through our partnership with Allfunds, one of the biggest fund distribution platforms in the world, we aim to increase operational efficiency throughout the fund buying and selling process for our institutional clients whilst making Allfunds data analytics available to our fund buyer clients. 

Increasingly, we are also using partnerships to provide asset manager clients with better insight and intelligence on their investments. Our Manaos platform is a case in point, giving our clients access to a range of leading fintechs in the ESG arena. Our clients easily and securely store their fund data on Manaos, a platform which meets the highest level of banking security, select the fintechs they want to work with from the app catalogue and analyse their portfolio at the push of a button. This strategy, which we call Open ESG, perfectly illustrates the benefits of banks partnering with specialist fintechs for the benefit of our clients.

Partnerships have a huge role to play in developing our offering and enabling our clients to manage their cost base, enhance operational efficiency and take advantage of what fintechs have to offer. Through these partnerships, our strategy is to join the dots between providers for better platform interoperability and to connect our clients to the wider ecosystem which, after all, is one of our key functions as a custodian. 


What potential does artificial intelligence offer to deliver better decision-making in global fund services?
For most companies, the pursuit of artificial intelligence (AI) solutions often focuses on two goals: reducing costs and driving efficiency. The path to delivering true, lasting value, however, is through harnessing intelligent automation that can act as a catalyst for end-to-end operational change. The goal, then, is not just building a slightly better version of an existing tool or process; it’s about creating an entirely new way to operate. This approach – what we call pragmatic transformation – still has cost reduction and efficiency at its core, but it has the potential to have much greater impact.

The central premise of our transformation journey has been that AI will enable better decision-making. Using BBH’s Anomaly NAV Tracking System (ANTS) as a case study, this hypothesis was proven during last year’s significant market volatility. In 2018, we introduced ANTS into our net asset value (NAV) calculation process for investment funds. Our model was designed to identify securities that were incorrectly valued and could, in theory, cause a NAV error. This technology uses predictive analysis and machine learning to eliminate the noise of false positives and highlight exceptions that might not have been previously detected. Analysts spend less time sorting through recurring exceptions and more time on evaluating potential NAV issues. 

This model was put to the test with the spike in trading volume right after the pandemic began. The average daily market change of security prices in March 2020 was over 5%. Our previous model’s data set had not seen this level of volatility, so adjusting the model quickly was essential. When back-testing ANTS against our legacy model, we saw a reduction of 77% in pricing exceptions that needed to be reviewed. 

The events of last year left us with several key takeaways. 

First, recalibrate and adjust to improve over time. No prediction model lasts forever – they will all degrade over time due to seasonality, changes in production data, new events, and patterns which lead to continual adjustments and fine-tuning. It is critical that the business and IT work together to address changes in real time. 

Second, data purity and accessibility is a prerequisite for agile methodology. Data, it’s often said, is the fuel that ignites the AI engine. That’s why real-time views into volumes and trends are paramount in adjusting to a dynamic environment. Data is useless unless it can be easily accessed, normalised, and understood by business users and IT alike.

Third, precision beats speed to market any day. Precision and accuracy should not take a back seat to speed to market. Given the business-critical function of NAV calculations, oversight and auditability are central to the sustainability of an AI program. 

We continue to keep these lessons learnt in front of mind as we look to the future of AI in our industry.

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