The FTF Exchange Podcast

The core of any client reporting challenge is inevitably a data problem, and the ultimate solution may be highly personalized self-service capabilities much like a media streaming service, says Andrew Barnett, chief product officer at Hub, a new provider for the global securities operations industry.

Barnett is the focus of this edition of the FTF Exchange podcast.

When asked about a new ecosystem for client reporting, Barnett focused on the new operating models that go beyond sending out PDFs, emails, and spreadsheets about a firm’s performance to clients.

Firms will need to evolve their solutions and the services and change the historic dynamic of one-way communication for client reporting. This will mean push-and-pull engagement patterns, Barnett says.

“What we’re now hearing is that people want to activate and call that data directly. They don’t want it pixel-perfect at any point in time because they’ve got broader usabilities. You have to expose that data via an API allow or other methods,” he says.

“Client reporting — it is a data problem. So, certainly, the solution has to be data-driven and that data has to be discoverable, you have to be able to interact with them, and it has to be actionable,” Barnett says.

“We have to allow end-users to interact with that data to generate the insights. It’s not on Hub or other providers in that space to be able to generate that insight because that is on the investment manager — that’s their IP, the USP [unique selling point] that they need to work with,” he adds.

Among the reporting needs of clients is a desire for more personalized offerings.

“We can kind of really see the fact that now customers are expecting that hyper personalization and shouldn’t be constrained by time or by a really heavy, kind of manual and technical engagement to get it done. It should be via no-code, low-code types of capabilities,” Barnett says.

“A key part of reporting is communication and a key part of communication is collaboration,” Barnett says. It will be essential to have “those talks embedded inside of the data, the reporting solutions, and really importantly a really well-defined kind of business glossary … So that when they look at a report they can self-service to ensure they understand … It is also almost taking that Netflix world that we live in now and making it available in the institutional client reporting space.”

In the podcast, Barnett also covers:

 The top post-trade challenges in 2024;

 The T+1 push and ultimately T+0;

 The future for Books of Records;

 The Ops advantages of Cloud-Native computing;

 A.I. and Ops; and

 Open Source software for financial services firms.

Hub is a cloud-native platform provider that offers connectivity between trading and relevant data to optimize the operations technology used by investment firms. By doing so, Hub says that it enables data streaming, artificial intelligence-based technologies, and automation.

Hub is a is a sponsor of FTF’s Performance Measurement & Client Reporting event taking place on Feb. 29, 2024, at Etc. Venues, 601 Lexington Ave. in New York City.

Operations teams need to shift away from multiple outdated accounting systems and data warehouses and toward an ecosystem that allows for these and related systems to talk together in real time, says Kirk Littleton, sales director at FundGuard, in this edition of the FTF Exchange podcast.

These changes will definitely yield firm-wide benefits, including those for performance measurement and client reporting teams especially if firms embrace updated application programming interfaces (APIs) and data buses.

“So, I think the operations people need to kind of have a paradigm shift to say: ‘I don’t need multiple accounting engines, I don’t need a big data warehouse to be the agent to push the data into other systems,’ ” Littleton points out in the podcast.

“Let the APIs, let the[Apache] Kafka, the [IBM] MQ buses move that data in real time from one source to one receiving system that needs that data. Performance and client reporting are great examples,” he adds. “They need data that has been verified and accounted for properly and then I can use it in my performance calculation or I can put it on this client statement. But I don’t want to do that through a data warehouse where the data might be stale at the time I get it.”

However, many firms cannot yet embrace APIs, Kafka buses and beyond because “many of the systems that are still in place today do not support those types of technologies,” Littleton says. “So, as a result, you’re still stuck with: ‘Okay, how am I going to get this data in real time from this engine to the trading system, order management, the client billing system — whatever middle office or front office tool you’re talking about.”

Littleton discusses in detail some of the ways forward:

 Modernize accounting systems — some systems are 50 years old;

 Embrace cloud-native solutions;

 Support systems that use artificial intelligence-based technologies particularly machine learning;

 Move to systems that have multi-asset class coverage; and

 Consider a multiple book strategy that encompasses IBORs, ABORs, performance books, and custody books to provide multiple views of a portfolio all at once.

“I want to be able to go to that accounting system in real time through an API and pull the data back and then act on it. So whether I’m an OMS trading system or a performance system I want to know what I own in real time. I want to know the value of that asset in real time, any cash flows that would affect performance – I need to know that type of stuff in real time,” he says.

FundGuard is a cross-enterprise, AI-powered, cloud-native and multi-asset class investment accounting platform for asset managers, asset owners, custodian banks and fund administrators

FundGuard is a sponsor of FTF’s Performance Measurement & Client Reporting event taking place on Feb. 29, 2024, at Etc. Venues, 601 Lexington Ave. in New York City.

Systems based on artificial intelligence (A.I.) technologies will meet the demands of financial services firms looking for new features and IT capabilities for their performance measurement operations. It will also mean a disruption of the status quo.

This is according to the latest FTF Focus podcast featuring Sean Murray, who is senior vice president, senior director, product management, at FactSet and Nina Mayers, who serves as director, performance product management, also at FactSet.

“A.I. is definitely going to be one of the biggest disruptors that well see in fintech,” says Murray in response to a question about A.I. innovations and how they might improve operational efficiency. FactSet has been investing in A.I. over the years.

A.I.-based systems could ease the burden of tedious processes that are part and parcel of performance measurement and client reporting.

“We know that this is an area where our clients spend a lot of time today. Performance is a very data-hungry process and the activities around the onboarding of data have been something that performance practitioners have struggled to come to terms with for a long time,” Mayers says.

“As we think about how A.I. can help with that process and look at the types of things where machine learning can sort of help us to replicate repeatable processes, there’s a lot of things that our clients do in terms of data checks, controls, analysis,” Mayers adds.

The help with onboarding will be “before we even really get to that sort of calculation engine that we think that A.I. can have significant impact on and can help to smooth out the bumps in the operational processes that our clients experience today,” she says.

The podcast also deals with new realities such as performance measurement platforms that are no longer empty boxes requiring a lot of data integration.

Firms expect that the data burdens of performance measurement platforms will be easing.

“The biggest thing they expect is to ease the burden of data integration side,” Murray says. “We come from the BISAM and B-One world where every client had to integrate their content sets into the application even if the content they were integrating was the same as others. So, if you’re integrating a Russell Index set or an S&P index set you’re doing the work that everyone is doing as well.”

“What our clients expect is essentially for us to deliver content into the application or that to be available immediately for the clients to be able to start up and create a new strategy and for them to be able to pull benchmarks in or pull in FX rates or risk-free rates to pull that in instantaneously that’s what their expectation is,” Murray says.

Mayers and Murray also discuss:

 The important change to come from FactSet’s acquisition of BISAM;

o The acquisition’s impact on FactSet’s managed services and outsourcing business

 The benefits from performance measurement platforms and offerings in hosted, software as a service or (SaaS) aspects of key;

 Vendor compression and other changes could mean the end of the line for some products and services; and

 The kinds of internal IT infrastructure changes that can help firms derive the most value from performance measurement offerings via a software-as-a-solution (SaaS) mode.

Kelli Sayres, senior managing director, head of Polypaths at Numerix, says that she is not surprised that some securities firms are lagging behind others in the “huge effort” to move past Libor. They have also had to deal with other shocks to the system such as higher interest rates and inflation.

“From what I’ve seen, most of our clients have been able to rise to the occasion and they were able to meet both the logistical and technical challenges that are associated with this type of migration [away from Libor],” Sayres says.

“It’s huge in scale. It impacts the curve construction, the definitions of instruments, pricing, discounting, what type of data you need to get a daily reset rate, model validation, refitting behavioral models — the list goes on,” she adds.

“Some firms still seem to be lagging a bit in overall migration. They haven’t necessarily validated all systems to make sure they function without interruption with the complete removal of Libor curves and vols,” Sayres says. “But given the complex ecosystems — in terms of technology and software — at large financial institutions it’s not surprising. And I do think most folks do seem to be marching steadily toward a clean and robust post-Libor framework.”

Polypaths, which Numerix acquired in August 2023, is a provider of analytics and risk management solutions for financial institutions. Numerix is a provider of capital markets technology solutions and trading and risk management systems. The Numerix Data Management System was voted Best Data Management Solution in the FTF News Technology Innovation Awards competition for this year.

This podcast also covers:

 the ripple effects of interest rates and inflation;

 structured finance issues;

 machine learning; and

 how Sayres was drawn to the complex world of fixed income analytics.

Securities firms searching for liquidity in capital markets are facing many challenges and factors such as high interest and inflation rates. But this situation represents a huge opportunity for firms that have liquidity and are benefitting from better management of lending and hedging decisions.

So says Gil Guillaumey, head of strategy for Capital Market Solutions at Adenza, in this latest edition of the FTF Focus podcast series.

Some firms are finding that market conditions are making it challenging to find liquidity. But those with liquidity many find themselves with an advantage.

“Market conditions can also be a huge opportunity for institutions that are long on cash or securities and we see a very active repo market that is boosted by more electronification and CCP pushes for more clearing,” Guillaumey says. “Treasury departments will increasingly pay more and more attention to the way they invest and the risk they take. So, controlling the lending and hedging decisions is something we see them increasingly doing.”

Adenza provides end-to-end trading, treasury, risk management, and regulatory compliance solutions. Adenza serves global, central, and regional banks, broker-dealers, insurers, asset managers, pension funds, hedge funds, stock exchanges and clearing houses, securities services providers, and corporates. Most recently, Adenza’s Cloud Services won Service Provider of the Year for 2023 via the FTF News Technology Innovation Awards competition.

For this podcast, Guillaumey discussed:

 The changing liquidity landscape;

 The new costs associated with this new liquidity landscape;

 How treasury groups cope with the lack of liquidity caused by high-interest rates and high inflation;

 Central banking and other regulatory changes

 How the new liquidity landscape & T+1 are affecting the electronic repo markets

Managed services clients and prospects of SmartStream Technologies are showing lots of interest in A.I.-based technologies and how they can impact securities operations, but there is a caveat to that evolving demand for A.I., says Nick Smith, executive vice president, managed services, SmartStream Technologies, in this latest edition of the FTF Exchange podcast series.

“A.I. cannot work in a black box and nobody knows what it’s doing,” Smith says via the podcast. “It needs to be able to provide transparency to both the senior managers and the risk managers, and the regulators exactly what activity the A.I.’s been performing and what was the logic used for developing those activities. That’s where we start looking at supervised and unsupervised A.I.”

In fact, the transparency will show how SmartStream has incorporated what it learned five years ago when the securities operations provider began “working with Tier 1 banks, household name banks, and partnering with them, in terms of understanding their use cases, and the challenges that they face and also having access to their data,” Smith explains. “That enabled us to invest and develop the tools that we have today … What we’re really doing is providing the agile tools for an evolving demand that we’re seeing.”

In the FTF News Technology Innovation Awards competition for this year, SmartStream Managed Services won Best Outsourcing Provider, and SmartStream Air won Best Cutting-Edge Solution.

During the podcast, Smith also covers:

 How A.I. and machine learning are major concerns in the capital markets industry now;

 How machine learning is impacting the managed services offerings from SmartStream;

 The role that A.I. and machine learning play in the SmartStream Air offering;

 How A.I. and machine learning can be applied to the burden of securities data reconciliation; and

 The security concerns about A.I. among managed services clients.

A key requirement of the SEC’s marketing rule is the presentation of net performance data along with gross performance data, but many firms have processes in place only for gross returns, says Olivier Verburg, vice president, analytics manager at FactSet in this latest edition of the FTF Exchange podcast series.

“Suddenly switching that to net will present challenges on the operational side of things,” Verburg says.

The regulator says that the rule is intended to provide more transparency for investors. “I think they’re trying to make sure consumers are comparing apples to apples when they’re comparing one fund advertisement with another fund advertisement,” Verburg explains.

“I think one of the main challenges is that firms may not have the processes in place to calculate net performance [at] every level that the SEC requires,” Vergburg says.

“Calculating net performance on the total fund level usually is nothing new, right? Especially when many firms are GIPS compliant, which many are. Firms also need to make sure that so-called extracted performance in their advertisements is reported net of fees as well,” Verburg says.

“So, an example of extracted performance in advertisements is it could be like a little table showing the sector or country returns of the funds. Or a table with returns and contributions of the top five or 10 securities,” Verburg says. “Values in a table like this need to be net of fee as well and that is something I believe pretty much no one has bothered to calculate for, therefore making it one of the main challenges.”

During this podcast, Verburg focuses on:

 The IT and operations changes firms will have to make;

 Changes in the way performance and compliance teams interact with each other;

 How firms can avoid being hurt by the new rule; and

 How firms can be compliant yet leverage the rule to their benefit;

FactSet is a financial data and analytics provider that offers financial services firms industry intelligence, ways to monitor portfolio risk and performance, and ways to facilitate trade execution. The company’s offerings include data feeds, desktop analytics, web and mobile applications, sell- and buy-side research tools, and client service solutions.

FactSet won the Best Performance Measurement System via the FTF News Technology Innovation Awards for 2023.

For this podcast, Alex Strekel, director of investment management solutions for Clearwater Analytics, focuses on the best definition of client reporting for 2023 and many other matters.

When asked to define client reporting, Strekel acknowledges that he takes a broad view of client reporting from his days working as a portfolio manager.

“I think about client reporting as anything that touches the hands of the client,” Strekel tells FTF News. “So, anything that a client is going to access via a Web portal, anything they’re going to access via paper … they’re going to hear from you as the manager of the portfolio or the relationship,” he says. “Any time you’re talking about performance with a client, right, you’re reporting to them.”

Based in Boise, Idaho, Clearwater Analytics is a software-as-a-service provider of automated investment accounting, performance, compliance, and risk reporting for insurance companies, asset managers, banks, and other institutions. In 2022, Clearwater won the Best Client Reporting Solution award as part of the FTF News Technology Innovation Awards competition. The company has been nominated for the same honor for 2023.

This podcast also covers:

 How a challenging economy changes the creation and delivery of client reports;

 How firms provide scalability to the new way of client reporting;

 The friction that remains between the best-of-breed & all-in-one approaches of providers;

 How a firm can provide best-of-breed and all-in-one to clients, and facilitate flexibility for client reporting;

 The best way for firms to decide which technology options are the best for client reporting;

 And how client reporting will get more complicated over the coming years.

In this edition of the FTF Exchange podcast series, Sue Sato from the Prime Settlement Services (PSS) department at Nomura Research Institute (NRI) focuses on why NRI is offering a combination of IT outsourcing, also known as ITO, and business process outsourcing or BPO.

NRI provides system solutions and consulting services such as management consulting, systems integration, and IT management and solutions for financial services and other industries.

NRI has offices in New York, London, Tokyo, Hong Kong, Singapore, and Australia.

Sato, whose efforts are focused on North America, takes questions from FTF News about the components of this combined offering and why it was done.

For this podcast, Alexander Sokol, founder, executive chairman, and head of quant research at CompatibL Technologies, focuses on how trading and risk models are getting an exponential boost from machine learning.

For instance, the standard models for interest rates are based on incremental changes in rates but those models are falling short now as rates are in turmoil across the globe as central bankers raise rates to drive down inflation.

“So, the new model types that we developed, which are called Autoencoder Market Models, are based on training the models to the entire history of interest rates not only for the currency we are modeling but also across all other currencies. This historical data that we are training our model to represents all kinds of market regimes,” Sokol says. “So, by training the model to all of the rates regimes across all currencies, these models become more effective following the change in market regime.”

Essentially, the models using machine learning can look back in time to find conditions that could be similar to current conditions. By taking that history into consideration, the new models can be more accurate.

The interesting fact is that this is just the start, Sokol says. Once financial services firms have laid the groundwork through cloud computing and other forms of modernization, then firms can start to explore variational autoencoders and other innovations at a time when they might need them the most.

The podcast also covers:

 A definition of a variational autoencoder (VAE) and CompatibL’s Autoencoder Market Models (AEMM);

 How machine learning-enabled models might help with interest rate portfolios, managing limits and add-ons, and credit exposure concerns; and

 How cloud computing and the push for digital transformations are helping to advance autoencoder-based models.

CompatibL is a trading and risk solutions provider that Sokol founded in 2003.

In 2022, Alexander was voted FinTech Person of the Year via the FTF Awards competition. CompatibL also won the best digital transformation solutions provider in 2022.