Market volatility and lower interest rates have put significant pressure on funds to meet their future liabilities. As a result, sovereigns and pension funds are experiencing a rapid rise in portfolio complexity, driven in part by increases in alternative allocations and a growing trend toward managing equities and fixed income in-house.
With this complexity comes several new management and oversight challenges, meaning that funds will need to reexamine their current operational and data management platforms with the goal of making them more resilient and agile. Specifically, these funds will need to up their game both in how they use technology for portfolio management and in planning for the future based on funded status, investment options and current liquidity.
For a better understanding, we’ve identified below some of the most pressing factors that are driving the need for future-state platforms:
- Various Trends are Demanding Changes to the Investment Process
- The increasing trend of insourcing the investment portfolio to reduce fees for externally managed equity, fixed income and ETF portfolios
- Increasing exposure to alternative and illiquid investments to minimize pension deficits in the reduced interest rate environment
- Participation in real assets, co-investments and GP stakes to increase the upside of returns
- Increased Outsourcing for Supporting Operational Cost Improvement Requires Integration
- Outsourcing of operational, compliance and accounting processes related to in-house portfolios
- Consolidated admin providers
- Technology and data outsourcing
- Gaps in Internal Data Maturity Models to Support Operation Models Need to be Addressed
- Lack of a cross-portfolio view and performance time-series to build allocation models
- Lack of alternative investment applications and cash flows for commitment pacing models to adjust towards projected benefit obligations (PBO)
- Challenge to provide timely analytics for investment committees
Fortunately, technology innovations in areas like the cloud, data management and analytics are providing funds with the ability to meet the challenges associated with portfolio complexity, achieve economies of scale, and future-proof their operations. Learn how IVP Consulting Services can help by contacting us at sales@ivp.in.
