Funds have traditionally looked at their investment operations team as the next tier down from the investment squad but this mindset needs to change, the chief operating officer at fund manager IFM Investors argues.
Operations should have a place at the decision-making table to help shape organisational strategy, argues Lounarda David, who will speak at Investment Magazine’s Investment Operations Conference on February 26 at The Westin in Sydney.
David says organisations should have a champion responsible for ensuring their operating platform, and the processes and talent supporting it, are forward-thinking, but this is often not the case.
“Operating models or investment operations are not simply a choice of administrational arrangement,” she says. “They are a key driver for the execution and capability of an organisation. They directly contribute to business agility and performance.”
Having good technology is crucial, she notes, but hiring good operations talent is arguably more important because operations teams today need to have highly diverse and multi-disciplined skillsets that are unlikely to be found in one individual.
“I’d say it’s probably the hardest area in an organisation to recruit for,” David says.
For example, these teams need to be able to understand increasingly complex investment instruments so they can spot potential problems. They need to be able to deal with multiple custodians or administrators. They also need an intricate understanding of complex regulations such as ASIC’s RG 97 fee disclosure and also be able to anticipate the challenges they will bring.
They also must have a deep understanding of the technology involved, along with data management and data security.
“We’re past the days where you can just build something and use it,” David says. “You have to be very agile, and the skills and experience required for being an agile operating team are a real challenge. You have to be a jack of all trades.”
Investment operations is different now compared with just five years ago, she says. Organisations need to begin with an operating platform that can translate business strategy into results and be flexible enough to handle unexpected changes to the market and regulatory environment.
The Australian market is highly competitive and funds are looking at increasingly complex and diverse asset classes and products to differentiate themselves, David says. The technology needs to be flexible enough to support that.
Data management is a significant part of the technology involved, she says, and is also increasingly crucial to meeting regulatory obligations around transparency. The ‘data lake’ large organisations create is enormous, and the best systems are useless if the data fed into them is not consistent.
“For large organisations in particular, when you’re dealing with really complex asset classes, it’s really hard to define the data governance you need [to make it] so that it doesn’t matter who creates the data point, the data is the same,” David explains.
Operations team members should have complementary skillsets and experience to support business strategy, she says, adding that they should be innovative, reduce key-person risk and create internal career paths.