Asset and fund managers are increasingly realizing the benefits of choosing to outsource or lift-out some or all of their middle-office functions. While outsourcing back-office functions has been popular for some time, this increase in middle-office outsourcing is due partly to the volatility during the COVID-19 pandemic and the more recent instability in the banking system. Events alone aren’t driving the trend, however. They merely help shine a light on pain points that were already there. Hedgeweek’s May 2023 report revealed three main drivers of middle-office outsourcing.
Core competencies: Through outsourcing, managers can realize benefits like improved investment decisions, accessing new markets and instruments, increasing trade volume and frequency, enhancing business strategies and objectives, and boosting investor confidence. By outsourcing these functions, managers can spend more time on core competencies.
Advanced technology: Building an advanced technology infrastructure in-house can be time-consuming and costly. Outsourcing provides a way to access the latest technology without a big upfront investment and ongoing maintenance and support costs. The outsourcing service provider should be able to offer operational standardization while remaining flexible.
Scalability and cost: Growth comes with challenges like increased acquisition activity, multiple jurisdictions, complex investment structures, increased scrutiny and more. Outsourcing helps address these challenges by providing a scalable solution to support growth. Because the fee structure is scalable as well, outsourcing can be an effective way to control costs.
Not every firm will choose to outsource the same functions, but needs may change over time, so it’s important to choose an outsourcing provider with a range of options to meet future aspirations. Compliance is another consideration. Your provider should have an automation infrastructure and effective processes already in place to help you meet changing requirements like the Central Securities Depositories Regulation (CSDR) in the EU and T+1 in the US.
SS&C has the expertise and service capabilities to help you meet challenges as you grow. By partnering with a provider with a long track record of successful lift-outs and outsourcing, as well as the systems and expertise to keep operations running smoothly, you’ll be free to focus on what you do best—identifying opportunities and making informed decisions.