Re-thinking fund accounting This is as true of fund accounting as it is elsewhere. Traditional systems have been built by and for accountants, not by and for operational business people. So naturally if you were to ask a group of fund accountants to specify a system, the result would be remarkably similar to what is now in place at most institutions. But if you take a step back and blend the accounting requirements with the operational business problem, you would come up with a very different solution. Industry experts are beginning to agree that there is a need to unify the underlying fund accounting and transaction processing application with data management, reconciliation and business process management or process control in one system. Rather than having these functions separated out across several platforms, integration eliminates replication and drives efficiency. If it were just a matter of technological change, we might have to wait a few more years before the way systems are currently used and our expectations of them are challenged. This time, however, the natural technology lifecycle has coincided with new financial realities. For example, the funds industry has seen pension schemes rapidly increase their asset pools. The 13 largest pension markets hit a record high of US$26.5 trillion in 2010, dwarfing the US$3.5 trillion in sovereign wealth funds, according to Towers Watson. These larger and increasingly skilled institutions are asking more questions about how much the industry is charging to manage their money. Funds managers therefore have both the financial driver for re-assessing their accounting processes, and the technological means of achieving it. There are real opportunities for firms to consider how technology can drive endto- end operational excellence and address business problems rather than focus purely on improvements to general ledger, trial balance and reporting functionality.
Investment administrators have access to new technologies which can usurp the layers of complexity that have accrued over the years, reduce the rate of errors and enhance services, write the CEO of the Milestone Group GEOFF HODGE and PHIL DAVIES, chief technology officer. Technological innovation comes in cycles. Every 10 or 15 years, a new wave of solutions comes along and shakes up industry standards, forcing users, administrators and funds managers to think again about the systems they use on a daily basis. We are at such a point today. Little more than a decade ago it was all about automating departmental workflows and eliminating the most egregious paper trails. Since then, some formidable systems have been built up and have gradually added more complex functionalities to investment administration. However, built on the mantra that greater automation leads to greater efficiencies, these systems are now at the point where the marginal utility of the architecture, the technology and the operational structures is all but exhausted. A radical change is needed in the way technology is viewed and deployed at an enterprise-wide level.