The 2019 Fixed Income Technology Landscape

Investment managers are viewing new technology solutions as a distinct advantage in an increasingly competitive operating environment.

In today’s operating environment, asset managers have begun to rethink how they utilize technology due to a confluence of factors. The complexity of fixed income market structures, compressed margins, and increased regulation have all been catalysts for technology adoption and operational change. Any one of these factors can be detrimental for the investment operations of an asset manager… combined, they strain capacity and cut into the profit margins of the business.

The fixed income markets have not kept up with the rapid rate of technological advancement that can be observed across other asset classes. However, that does not mean bond investors aren’t looking to innovate. Fixed income managers face a unique set of technology challenges. Pain points range from data management and portfolio reporting to compliance, middle and back office operations, trade reconciliations, and many more. A good number of these challenges can be overcome with the appropriate technology applications and systems.

Of the more than 500 investment executives surveyed in State Street’s 2018 “New Routes to Growth” survey, respondents identified emerging technologies as the leading opportunity to grow revenue. Fixed income asset managers can change technology from a headwind to a competitive advantage when it is utilized effectively to improve processes, increase transparency and address the operational burden of regulatory changes.

While fixed income asset managers have a diverse set of investment processes and objectives, the common denominator among all managers lies in their need to leverage technology due to the ever-changing operating requirements of the markets. Bond managers have come to rely upon third party solutions as a cost-effective means of maintaining best-in-class systems, in lieu of building these tools in house. Managers can choose between a front-to-back system which consolidates applications across a single platform or implement a combination of best-of-breed tools where a firm identifies and integrates the applications believed to be best suited for their investment processes.

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