The Accelerated Adoption of Front Office Outsourcing
COVID-19 has prompted investment managers of all sizes and strategies to undertake a comprehensive review of their operating models. Challenges from market volatility, extreme margin pressure, technological complexity and, increasingly, business resiliency have all been at the forefront of their thinking and the pandemic has accelerated changes that were already underway. This has led increasing numbers of managers to question their operations and ask – in some cases, for the first time – whether their current arrangements are achieving value.
Many investment managers are actively considering outsourcing to a hyper-scale, expert provider as a potential solution.
Old assumptions are being challenged and, while costs savings remain a core driver, this is no longer the sole focus. The perception of outsourced trading as only a defensive reaction to increased pressure on margins is changing rapidly and it is being seen as part of a target operating model – enabling an ‘optimal state’ that offers a variety of other benefits. These include new capabilities, access to new markets and liquidity, improved governance and enhanced operational resilience.
We were already travelling towards a ‘new normal’ and COVID-19 has accelerated the time when we will arrive. The most successful managers are adapting operating models to avoid being left behind.