The Opportunity
The client, a leading asset manager, wanted to give their portfolio managers an additional toolbelt to generate alpha. In addition, they wanted to open up additional investment strategies which were not correlated and provided diversification benefits to their current portfolio.
The FINARCH team helped advise the client on target state feasibility, perform an impact assessment, and assisted with the instrument onboarding process. The client had struggled with this type of activity in the past, due to several challenges:
- IT Integration challenges due to the many systems used in their IT ecosystem (CRM, Front Office OMS/EMS, IBOR/ABOR, Risk, Legal, Compliance, Reporting, etc…) which all had to be enhanced to support any new investment product
- Stakeholders demands and time to market being extremely important – as the investment decisions and strategy were tactical and had to be executed in the market quickly
Engagement Approach
The company engaged FINARCH team to help them navigate the instrument onboarding process. As part of our standardized process onboarding approach, we recommend the following standard approach for each instrument:
Business Case Justification
To confirm the business case and validate that any pending business rationalization or decisions are clear, prior to the beginning of the implementation. This step goes beyond the actual system implementation, and is focused on items such as confirming the trading venue, custodians/transfer agents, and counterparties or brokers
Impact Assessment
High level impact assessment to get an understanding of impact across the entire IT ecosystem. This task is critical in getting a reliable implementation time effort and setting a transparent implementation time transparently for all stakeholders
– Post Go-Live Support: To track KPIs in order to validate and confirm return on investment from the implementation. This could be the following:
○ Operational KPIs: Straight through processing rates (%), failed trades or trade lifecycle failures
○ Front Office KPIs: Alpha generation and slippage from the new implementation
Workflow mapping and Design
To design the front-to-back workflow for the instrument, emphasizing straight-through-processing and avoiding any manual workaround solutions
Training and Rollout
Training and Rollout: To train front office and operational staff on new workflows to set clear expectations and accountability for the entire trade lifecycle of new instruments
Post Go-Live Support
To track KPIs in order to validate and confirm return on investment from the implementation. This could be the following:
- Operational KPIs: Straight through processing rates (%), failed trades or trade lifecycle failures
- Front Office KPIs: Alpha generation and slippage from the new implementation
The Impact
The project successfully went live and started to generate a return on investment immediately. Front office (after each implementation) started to trade shortly after each instrument went live, to put their new tools to use. The firm was able to open up additional strategies which were previously not able to be executed due, and to reduce exposures and open up uncorrelated investment opportunities.
More importantly, it gave the firm and stakeholders confidence in their current operating model, and as the team had provided the recipe to making instrument onboarding a repeatable process, so that future instrument onboarding will be further optimized and continuously improved.
This collaboration underscored FINARCH’s ability to bridge strategic vision with execution excellence in complex, evolving markets, which enabled us to showcase our functional domain knowledge and system expertise.
