Asset managers play an increasingly pivotal role in the financial system. They have assets under management (AuM) equal to 75% of banking balance sheets on a global basis which makes them, in many ways as systemically important as the banks.
Buy-side firms are continuing to face a rapidly changing operating environment. Key drivers and principles are contradictory and conflicting:
- A demanding search for yield and returns within a challenging and non-intuitive macroeconomic environment that therefore needs performance to be measured more closely against risk appetite across a greater universe of assets.
- A continued need to comply with behavioral change and reporting requirements of multijurisdiction regulation and market structure changes that is going to become more intrusive on the buy-side as attention is turned towards it.
- Costs need to be sustainably managed down to retain and win clients, who are now more insightful, and satisfy shareholders.
- The buy-side is taking over a lot more sell-side asset ownership and, therefore, risks.
These drivers have a profound effect on risk management and its technology which requires:
- “On-demand”, nimble risk management software platforms or services that support all parts of the enterprise.
- Broad asset class coverage, extensive risk factor analyses, a choice of pricing and analytic source-code or high-level scripted libraries.
- A focus on supporting and contributing to investment decision-making, portfolio management and optimization through configurable dashboards for analytics, stress testing and scenario analyses.
- Comprehensive, best practice data management.
- Cross-fertilization of software and services that come not only from the sell-side and other financial services areas but also from other industries and businesses.
In our previous report we noted several drivers of buy-side risk management – regulation, market structure changes and investor behavior shifts. There has been little change in direction but there have been increases in velocity and acceleration with some bumps along the way, but firms are still on the journey. What is clearer in our view now is that the buy-side risk tools, while converging with the sell side tools, will always remain somewhat different, due to the exigencies of each group’s legacies, their inventory management, investor reporting, history of out-sourcing and relative lack of skilled resources. This report updates our earlier research on the current trends in buy-side risk management technology.
This report uses Chartis’s RiskTech Quadrant® to explain the structure of the market. The RiskTech Quadrant® uses a comprehensive methodology of in-depth independent research and a clear scoring system to explain which technology solutions meet an organization’s needs. The RiskTech Quadrant® does not simply describe one technology solution as the best risk management solution for the buyside; it has a sophisticated ranking methodology to explain which solutions would be best for buyers, depending on their implementation strategies.
This report covers the leading vendors offering risk management solutions for the buy-side, including Axioma, BlackRock Solutions, Broadridge, Calypso, FinAnalytica, FINCAD, IBM, ICE, Imagine, Markit, Misys, MSCI, Murex, Numerix, OpenGamma, OpenLink, Quantifi, SimCorp, StatPro, SunGard, UBS Delta and Xenomorph.
This report excludes any analysis of the operational risk and governance requirements for the buy-side. This important market segment is covered in other Chartis reports on operational risk management systems, conduct risk and GRC (Governance, Risk, and Compliance).