Unified Data Solutions for the Private Markets Industry

December 20, 2023
Video

How Can Firms Overcome Legacy Data Challenges?

Operations, data, and technology are at the forefront of business priorities for many institutional asset managers. As firms look to their future, one of asset managers’ most significant obstacles is legacy operational platforms, which can hinder their ability to adapt to the changing industry. With an estimated 40% of enterprise data management platforms still legacy, asset managers’ need to modernize systems and migrate to cloud-native platforms is increasingly apparent.

Cloud-native SaaS platforms that address asset managers’ complex needs offer a unified approach to automate the investment lifecycle. With opportunities to lower total cost of ownership, scale business, and improve agility, asset managers can streamline their operations and adapt to the changing landscape. The transition to modern financial data platforms enables firms to address the challenges of data aggregation and reporting and fosters agility to manage their data. As institutions point to data platform transformation as one of their top business priorities, asset managers ready to embrace unified platforms will be prepared to secure their position as a leader in a new era of efficiency and innovation.

In an interview with Foxon Media Digital, Mahesh Narayan, Institutional Asset Management Segment Head at Arcesium, spoke about how firms can modernize operations, data, and technology with a unified platform.


Video Transcript

Amy Malkani (AM): Hi everyone. Welcome to Foxon Media Digital. My name is Amy. Today I’m joined by Mahesh Narayan, who is Institutional Asset Management Segment Head at Arcesium. Welcome, Mahesh. It’s great to have you on the channel.

Mahesh Narayan (MN): Hi, Amy. Great to chat with you and appreciate the invite.

AM: You’re very welcome. And of course, you’re taking part in our events, so we wanted to have a little spotlight on you and catch up about your role and about what Arcesium is doing. So just before we dive into some of the deeper trends, could you tell me a little bit about the key challenges facing the buy side in terms of operations, data, and technology at the moment?

MN: Great question. I mean, this is exactly what asset managers and the leads within the firms are working on, operations, data, and tech. They face a number of challenges, but the number one challenge that they seem to be facing today is around legacy operational platforms, right? And how many of these legacy operational platforms, they simply enable to support the emerging business needs of the asset manager, right? So we speak to asset managers every day, from the small ones, the mid-sized ones, to the larger ones who are like 100 billion AUM and above, right? But the challenges they all face, it cuts across them, right? It’s around these legacy operational platforms. And as you know, asset manager business needs are changing quite rapidly, right? They need to support new asset classes. They need to structure new products. They need to integrate with new data partners, right? They need to manage risk and performance more efficiently, right? It’s an interesting fact, I don’t know if you knew that 40% of enterprise data management platforms within asset managers are still considered legacy, right? These were platforms which they brought in sometimes 5, 10, maybe sometimes 20 years ago, right?

And they’ve been there for many years, they are on premise, they’re old, they do the job, right? But they don’t support the future needs, right? And it’s a similar metric for the mid and the back office overall, right? It’s a fairly similar metric. What you have is they’ve invested in front office platforms, but they haven’t invested enough in the mid office. Right? And the back office. So in almost every situation, just to summarize, the asset manager has a portfolio of legacy platforms, right? And they’re patched together in some form. They do the work, right? But they’re just incapable of supporting future needs.

AM: That’s really interesting, and I had no idea that it was 40%. We often see a lot of investment managers struggling with updating their infrastructure, but I didn’t realize it was that amount. So that’s really good to know. And in light of this then, as we see the evolution of the industry and as they gradually revamp their legacy systems and migrate to the cloud and everything and move away from on-prem, what will this look like? And can you speak to some of the future needs that will arise as part of this migration?

MN: Absolutely. Look, there’s obviously the technology and the operational needs are driving some of these changes, but at the end of the day, it’s the business, right? It’s the business needs and what the emerging needs are for the business that are driving these changes, just forcing the move like you rightly captured, going from legacy to cloud native platforms, right? So what are the challenges here? What are the needs here, right? Asset class support is usually seen as the number one need. Most asset managers are expanding their asset classes from equities and fixed income to private assets: real estate, infrastructure, private debt, and so on, right? Are these systems now able to support them in that move towards private and other asset classes, right? Workflows are becoming much more complex, right? We’re talking about operational post-trade workflows, right? When you have a new asset class, your workflow changes, your data needs change. And outside of that, as we all know, there’s data coming in from many more sources now, right? And you’re connecting with more data partners and you’re connecting with more custodians and so on. So the workflows are much more complex, right?

And some businesses are saying, hey, data tech teams, operational teams, you need to support my complex workflows. Analytics and reporting is becoming far more complex, right? And it’s becoming more ad-hoc and more customized. It needs to be more scalable. It needs to be more personalized. Every asset manager is trying to personalize the reporting they offer to their clients, to their end clients. It could be a portal or it could be just reports, or it could be some other form of analytics. But it’s becoming just more detailed, more personalized, and more ad-hoc. The data management needs are changing. With any of these new asset classes and new products being created, there’s more data management, right? Let’s not forget the need to lower TCO. And when I say TCO, they’re talking about total cost of ownership, right? Asset managers have always been under pressure to lower costs, right? And it’s never changed. It’s always been among the top priorities for asset managers. That continues to be the case. And lastly, like you said, there’s migration to the cloud, right? When 40% of your operational platforms are still legacy, right? And you see the benefits of the cloud in TCO and so on. You are going to migrate to the cloud, right? So these are the business needs. It’s not technology-driven at all. It’s the business, which is saying, look, I need you to support me for my new products, for my new regions, for my new asset classes, be more agile.

AM: So in light of all of those business needs, then how does your company help asset managers overcome these challenges?

MN: Great question. So, Amy, at Arcesium, we are a financial technology firm. We offer a cloud native SaaS platform to help asset managers automate their entire cost investment lifecycle, right? We talked about all these challenges. Essentially, what our platform does is address these challenges and offer a single unified platform, right? We are a unified platform. We’re not a bunch of products just tied together. Our platform is cloud native, which means it comes with a host of cloud-native benefits, a lot of which we’ve already talked about, lower TCO, scalability, agility, right? We are hosted an AWS, and we built on using a number of open source technologies, right? From a functional perspective, we are a full mid to back office platform. We can handle asset classes and portfolio complexity. We can handle all the complex operational workflows. We integrate with a number of third-party platforms. We have a number of self-service tools, and we can scale. So most of our clients are large asset managers, hedge funds, private equity firms. And what we do is our platform replaces these legacy technologies that we talked about. In most cases, we replaced three, four, five platforms with just one solution. More recently, we’re seeing a lot of interest from asset managers regarding modern financial data platforms. Not just the operational platform, but the underlying data platform. And here we solve the challenges of data aggregation, data integration, analytics, reporting, and just being more agile in terms of how you bring together data and sort of master data within the cloud.

AM: That’s fantastic. And yeah, in light of all this, and you’ve highlighted the problems, you’ve looked at how your solutions can help solve these. So what do we see from the future? Do we think that companies will pick up speed and adopt these solutions quick enough, or do you think they’re a bit slow to the mark?

MN: Yeah, it’s going to be a cycle, right? What you’re seeing is you are going to see this two or three-year cycle where asset managers will see the benefits of migrating off these legacy platforms to modern platforms and the benefits they bring, right? And you’re seeing that, right? I’m speaking to our pipeline and what we see. We’re seeing more asset managers understanding the value that these new platforms bring to their ecosystem, right? So we think next year is going to be a big year in terms of asset managers really accelerating their move to some of these cloud platforms.

AM: That’s great. And say I’m an asset manager and I’ve decided to take that plunge and I’ve moved away from my legacy systems. I’ve gone for one unified platform, so everything’s in one place. What does that look like on the ground? What does that mean? How do you get the data in front of them to drive the operations?

MN: Great question again. Data is key to supporting operations. A couple aspects here. Our platform comes out of the box with over 200 connections to third party, firms to data vendors to fund admins. This is day one right out of the box. So a solution and that’s what asset managers need. You need to check that box; that you have these connectors out of the box. The other aspect is that data needs change. New datasets keep getting added almost sometimes on a daily basis. New vendors get added. This is where legacy data platforms and legacy operational platforms have had a challenge, right? You’ve heard and you’ve seen it takes months sometimes for some of these legacy platforms to add a new data set. Sometimes a year to add a new vendor. Our self-service tools allow the client, the user, to add a new dataset or a new vendor in fairly fast order. And our clients tell us that’s a huge value add. So, hopefully that answers your question. A lot of the out-of-the-box connectors that come with the platform, the ability to add and adjust data feeds. And those are important. Those will actually create the business case in some sense firms to migrate up legacy platforms.

AM: Yeah, absolutely. In closing thoughts. You gave a great overview of how you’re solutions work and what kind of technologies there is and how it can solve those problems. So what is your focus next to help them scale their businesses and grow AUM? You know what’s next for you and what are your coming goals based on where the industry’s headed?

MN: Our ultimate objective at Arcesium is to help our clients grow their businesses. That’s our ambition and our focus. So there are a couple ways we help them. New strategies; we help asset managers, through our platforms, launch custom strategies and portfolios. And we’ve been very successful at that. Support for new asset classes. We talked about privates; we talked about alternatives. We’re one of the few vendors that can support public investments, hedge funds, and private markets on the same platform. New businesses and as an example I would say multi-manager platforms. We’ve successfully helped two very large asset managers really operationalize their new multi-manager platforms within their firm. And you’re seeing a lot of asset managers do that. And lastly, we also help firm scale internally. That’s equally important. We obviously help them scale their business overall. But it’s also equally important that we help them be more productive at scale internally. We’re talking about internal tech teams, internal data teams, operational teams. So here, we help them with key workflows and use cases. It could range from reporting and analytics; it could be treasury or cash management; it could be reconciliations or it could be master data management; or it could be a combination of everything, right? The whole end-to-end workflow. So that’s how we help scale our clients and their businesses externally and internally.

AM: Amazing. Well I’m afraid that’s all we’ve got time for but you will of course be at the Summit Asset Management in New York in October so that everyone can meet the team in person and can find out a more about this and what’s happening in the next year. So thanks so much for joining us on this channel, Mahesh. It’s been great having you.

MN: Awesome. Look forward to the event. I’m sure it’s going to be a huge success.