From Outsource to Insource
Could Asset Managers reverse the outsourcing trend?
For over 20 years, most asset management companies have followed the trend towards outsourcing back office fund administration. Notably in a post-recessionary era, fund managers have been able to fix a more predictable cost base for their administration whilst third party providers have grown their client bases for services such as Transfer Agency and Fund Accounting.
Historically, the more distant the memory of recession becomes, financial institutions have tended to make decisions based more on providing quality and bespoke services and will become less constrained by cost. So, when will asset managers decide that insourcing is the new way forward?
Clearly, outsourcing provides several advantages to fund management companies in terms of satisfying service requirements and meeting regulatory responsibilities without establishing the necessary critical mass of resources in house. However, for those fund operators for whom the vanilla administration approach doesn’t work, there could be a number of advantages to insourcing administration:
The ability to tailor systems and processes to the intricacies of their own products
Improving investor relationships via closer in-house contact
Complete control of quality and better visibility of potential administration issues
Quicker response to change – decisions belong in-house
Reduced oversight costs can be offset against the cost of in-house administration and systems
Anecdotally, we hear that some asset management companies are keeping their stance on outsourcing versus insourcing under review. It will be interesting to see if a longstanding trend starts to go into reverse.
If you are considering taking your fund administration in-house you will need specialist personnel. Please feel free to contact Steve Johnson to discuss your staffing requirements within either of the outsourced or insourced scenarios.
