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Asset managers look to outsource front office
25 June 2014
Drivers include regulation, technology advances and need to diversify in new markets
Asset management firms are increasingly looking to outsource
their front office functions, according to a new report by BNP
Paribas Securities Services and Investit.
The research revealed several reasons for this growing trend,
including needing to keep up with regulatory requirements,
advances in technology as well as the need to diversify in new
markets and instruments.
"Asset managers are at a cross roads. They are looking for
revenue streams in new asset classes and geographies, while
having to demonstrate best execution and cope with market
fragmentation. All these factors are putting pressure on
dealing desks, which need ever more specialist expertise," said
Philippe Boulenguiez, head of dealing services at BNP Paribas
"Asset managers are increasingly coming to the conclusion that
it might be far more efficient - both in terms of liquidity and
cost - to use an outsourced dealing service instead of setting
up multiple dealing desks, some of which might end up being
under-used," he added.
Asset managers surveyed in the report said there were several
advantages to outsourced dealing, including lower costs across
personnel, data and technology, benefits in scale, extended
dealing hours and increased proximity to markets, as well as
lower operational risk and cost of errors.
"We have been looking at asset managers' attitudes to
outsourced dealing for a number of years," said Richard
Phillipson, principal and director of institutional consulting
"Managers increasingly see outsourcing their dealing function
as an economically attractive approach to achieving best
execution. They see that the advantages could outweigh
perceived negatives, such as losing some in-house expertise. UK
based managers are open to experimenting by outsourcing Asian
dealing for example. This is a marked change."