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ISC regularly produces articles and White papers through the ISC Chronicle, the links below contain details of these articles sorted by topic.

Front Office

The Research Commission Battle So you think MiFID II is just another piece of legislation waiting to be rubber stamped by the European Commission and Parliament? Think again – one the most hotly disputed and potentially high-impact topics for the asset management industry is still very much up for grabs and no one knows the final outcome.

Front office systems challenges – A vendor review In the lead article of the last edition of The Chronicle - Top Five Issues for 2010 - we identified trading and technology as one of the big ticket issues of the year ahead...

Property Fund Management – to 2010 and beyond To 2010 & beyond - are your decision-making, systems and processes sufficiently robust and integrated to cater both now and in the future? Nick Percival takes a look at some of the pertinent issues in the first of a series of articles...

Middle Office

Blockchain - Could Real Time Trade Settlement Become a Reality? A principal reason for moving to real time trade settlement would be to enable better cash management within funds, removing the constant questioning from fund managers as to how much cash they have to use. A great deal of effort and manual work is involved when compiling cash data in order to get an accurate picture of the cash position at any point in time. When making a purchase on our personal accounts, monies are debited either instantaneously or at least same day, so why does it take 2 days to settle a trade in a fund?

A Good Time to Review Fund Types and Locations This article surveys the fund vehicle landscape and likely locations those funds may be domiciled against the background of the UK/EU referendum and changing factors and trends sweeping over the industry and Europe. In seeking stability and certainty within the political, legal and regulatory frameworks, the fund management industry is driven as much by the requirement to insulate funds against further regulatory and political changes as by the distribution opportunities afforded....

Successful New Product Delivery Investment management products are different. At the end of a new product what is to show for all the expended man hours of investment? There’s no shiny piece of must have technology or smiling customers driving the product from the forecourt. At best there is a brochure and even that is rarity these days, maybe it’s featured on a website or maybe it’s just an identifying code on an exchange.

Considerations when selecting a risk system In our autumn 2012 edition we discussed the current state of risk management within the asset management industry and the concept of a risk 'toolbox' to aid investment decision making. In the subsequent follow up article in February 2013 we focussed on the importance of data and communication within the risk process. In this issue, we look at the challenges faced by asset owners and some of the considerations when selecting a risk system.

Ensuring the Delivery of new products Product Development is multi-disciplinary; requiring a knowledge of product and investment strategy, an understanding of the end-to-end investment management process, effective stakeholder management and disciplined project management.

The many BORS of IBOR There are many drivers for a single view of positions and trade data, but the most immediate is to deliver the flexible, robust and granular data needed to support the wave of regulation impacting the financial services industry. The industry requires accurate and timely positions and trade data to appease a varied audience. These data sets have become known as the Investment Book of Record (IBOR). But hasn't the industry already bought, coded and implemented systems to deliver IBORs?

Risk Managemkent Part 2 - Implementation issues & data with risk management There are many drivers for a single view of positions and trade data, but the most immediate is to deliver the flexible, robust and granular data needed to support the wave of regulation impacting the financial services industry. The industry requires accurate and timely positions and trade data to appease a varied audience. These data sets have become known as the Investment Book of Record (IBOR). But hasn't the industry already bought, coded and implemented systems to deliver IBORs?

GIPS & Composite Modules – Vendor Q&A A shortened version of this Q&A appears in the Autumn 2012 edition of the ISC Chronicle. This paper is the full Q&A with the following vendors; Ortec Finance, Wilshire, BI-Sam and Statpro. The questions discuss the benefits of using composite models, the focus of the vendors, the trends in the industry and other related topics.

Risk Management Part 1 - What role should it play in any Investment Process? This is the first of two articles exploring Risk Management, with an associate of ISC, Chris Sandford. Chris is an Actuary and Independent Risk Consultant whose experience spans stockbroking, bond, equity & derivatives fund management for various asset management companies including County NatWest, Morgan Grenfell, AXA, West LB, Aerion and Schroders.

GIPS – Easing the verification pain The cost of verification may be large within the realms of the performance department budget but it is minor in the grand scheme of total asset manager costs. Therefore, a prospective client or investment consultant may ask why are you not be verified, is something being hidden?

TSAM 2012 client reporting and Communications – Themes from the chair The TSAM Client Reporting and Communications stream was chaired by Simon Harris, Partner at ISC. Simon also hosted the day two workshop on Client Reporting workflow. This article expands on the key themes discussed and the differentiators that now make client reporting an important factor when clients are selecting their Investment Managers.

Client Reporting trends for 2011 One of the key principles of Darwin's theory of evolution, is that evolution itself is not a constant process. In fact, evolution only occurs where the need arises, and is actually punctuated by long periods of stasis (where a particular species doesn't evolve at all), followed by short and rapid evolutionary spurts forced upon a species by environmental change. If a species doesn't need to evolve because its environment doesn't demand it, then it will remain as is...

Wealth Management, Risk & Regulation – the terrible twins Risk and regulation stand like two towering giants over the Asset Management industry, exerting their respective pressures on Institutional and Private Wealth managers alike...

Want to win clients on the strength of client reporting In the Winter 2010 edition of the ISC Chronicle, we examined the ways in which client reporting is evolving with views on 'The Shape of Things to Come'. In this article, we take a more detailed look at the challenges of client reporting workflow as we seek to de-mystify the perception that it is a complex beast when in fact adhering to some simple dos and don'ts proves it doesn't have to a daunting exercise to implement a sensible process for client report production...

Notes on a postcard – thoughts on investment performance measurement The data explosion which has occurred over the last ten years has directed and intensified a trend in the asset management world. Data now represents the heart of the Asset Management business and its efficient management provides tangible benefits which enhance a firm's competitive advantage...

Guideline Monitoring- ensuring you get what you want Recent events have, not surprisingly, focused attention at a number of Investment Managers onto Compliance in general and onto Investment Guideline monitoring in particular.

Successful Client Reporting- Hit or Myth No article is ever going to be able to give you a comprehensive approach to your Client Reporting project, but here are a few of the key issues to bear in mind if you are starting, or have started on such a venture So you're a successful asset management company...

Client Reporting and Distribution – an electronic revolution Dr. John Francis 'Jack' Welch, Jr., the former Chairman of General Electric once famously said 'It (the internet) is like the flu - it just spreads like crazy'. Few would deny the acuteness of this observation, and it seems that even the traditionally paper-based activity of Asset Managers sending client reports is now succumbing to the attractive capabilities and efficiencies of the internet....

Risk Management in Risky Times As the dust begins to clear from the fallout following the detonation of the bombshell that has gone off in the financial markets this autumn, many investment managers will now be looking at themselves to see how best to operate in a slimmed down, potentially more volatile environment.

Faith – Based Indices – A shelter in stormy times With uncertainty in global markets and the threat of the 'R' word looming over the dinner party conversations of New York and London, there are those investors who may look for a little succour in the form of the raft of ethical and religious based indices now offered by major index vendors. Although these indices are not new to the market, this article will seek to explore some of the more recent product developments, the concepts underpinning them and the ethical issues being faced in the industry...

Back Office

Grexit - A Practical Approach to Operational Impacts With the Greek situation looking to reach its denouement, the one thing which is certain is that the impact on Greece and the Greek economy will be severe and drawn out with a cycle of inflation and currency devaluation depressing asset values while at the same time increasing the burden of that part of existing external debt which hasn’t been written off...

Reaction to CCP In an article in the Autumn 2011 of the Chronicle we explored some of the issues likely to result from Central Counterparty Clearing (CCP). Since that article there has been some reaction to the establishment of CCP from central banks, regulators and the industry.

Preparing for CCP 2011 has seen a continued focus on regulation of markets and participants on a global scale. Derivatives and particularly the OTC world, seemingly the bete noire of press, politicians and regulators alike over the last few years, are the focus of much of this with Dodd-Frank in the US leading the way in terms of legislation...

Fund Accounting Efficiency – Interview, Geoff Hodge, Milestone In this article we interview Geoff Hodge, the CEO of Milestone Group and discuss some of the challenges facing the fund accounting and funds processing industry. Milestone Group specialises in the application of advanced investment technology to support clients globally in the automation of complex and business critical functions relating to fund accounting...

OTC Derivatives Collateral Management ISDA's Collateral Management Best Practices Paper offers the industry a clear framework for processing of OTC derivatives collateral. Industry participants weigh in on the paper's contents and what should be the next focus of market-wide initiatives to improve collateral management procedures in the medium term...

The importance of collateral management in our brave new world If you take only a cursory interest in the financial headlines, you might be forgiven for thinking that the need for bilateral collateral management of OTC derivatives will soon disappear; that we can rely on central clearing to solve all of counterparty woes, and we can all now kick back and relax, safe in the knowledge that the world is a safer, cuddlier, more comfortable place to be. Unfortunately the truth is somewhat more opaque...

Central Counterparty Clearing – Panacea or False Dawn To what extent is a Central Counter Party for Over- The-Counter derivatives a positive development for Investment Managers?

Have reports of the death of OTC derivatives been greatly exaggerated The first half of 2009 has been a year of great uncertainty in the OTC markets as regulators around the world attempt to shore up some of the perceived risks highlighted during the turmoil of recent months...

OTC Derivatives – Taking the next steps to operational excellence This article was originally published as a joint White Paper with Geoff Harries, VP Product Strategy CheckFree Investment Services Software...

Collateral Management – Buy, Build or Bounce The last few years have seen something of a quiet revolution in the world of investment management as managers have begun, slowly at first but with rapid acceleration to get involved in the hitherto esoteric world of OTC derivatives...

Regulatory

MiFID II - Costs and Charges Transparency is the holy grail to which MiFID II aspires. Not just transparency in the markets, but also transparency in the costs and charges paid by the underlying investors in funds, or those with discretionary agreements. Regulators are aiming to make the investment management industry as transparent as a 3-star Michelin chef's consommé. They want the ability not just to see the direct costs, but now, also the cost of investing in the markets, through the use of Transaction Cost Analysis.

Tax Transparent Fund Solutions - The Fund Administration Challenge The United Kingdom's Tax Transparent Regulated Fund (TTF) vehicle has provoked much discussion in the industry. It offers many benefits, such as fund rationalisation, regulatory consolidation and coping with complexity of distributions as well as allowing multiple withholding tax treatments per investor. The opportunities presented by TTF's for clients led to ISC reviewing both the appetite and provision of operating models to support these new products by the service providers.

MIFID II - The Sequel When Hollywood produces a movie sequel, it's invariably not as good as the original, and is purely made to cash in on the success of the first film. You only have to look at such exploitation fodder as "Crocodile Dundee II", "Speed II: Cruise Control", "Son of the Mask", and the atrocious "Highlander II: The Quickening" to see that. But regulation is a very different matter, and whilst the numbering system might be the same, that is pretty much where the comparisons end. Of course you do wonder where each piece of regulation might stop. UCITS V for example...

Delivering Regulatory Change - Lessons Learned Project Managers used to take great delight in their stock joke 'the only constant is change'. Maybe that should be updated to 'the only constant is regulatory change'. The last few years have seen a wave of regulation wash over the investment management industry with RDR, AIFMD, FATCA, EMIR, KIID, MIFID II and CASS - an alphabet soup of acronyms. Whilst we have to accept that new regulation is a constant, we are hopeful that by applying the lessons that we have learned so far, implementing regulatory change should be less onerous going forward....

The Research Commission Battle So you think MiFID II is just another piece of legislation waiting to be rubber stamped by the European Commission and Parliament? Think again – one the most hotly disputed and potentially high-impact topics for the asset management industry is still very much up for grabs and no one knows the final outcome...

Solvency II - Time is Running Out Any doubts that may have lingered about whether Solvency II would be go live in 2016 have been brushed aside by recent activity by the EU and the PRA (Prudential Regulation Authority). On the 19th March, Solvency II implementation regulations were issued in the Official Journal of the European Union...

Annex 4 AIFMD Reporting to National Competent Authorities The European Central Bank through the European Securities and Markets Association (ESMA) are looking to collate data from all Alternative Funds in order to be better placed to recognise the value of systemic risk if another market crash were to occur. The AIFMD regulations determine what needs to be reported by each Alternative Fund Manager (AIFM) for their range of funds both individually and at an aggregated level.

CRD IV - Unintended Consequence The fourth incarnation of the Capital Requirements Directive (CRD IV) is the EU's implementation of Basel III, the international regulatory capital framework. It is one of the key responses to the financial crisis.

Update on Solvency II Pillar 3 Asset Management Reporting The trials and tribulations of Solvency II have over the last few years migrated from specialist insurance and asset management publications to the established broadsheets. The process of compromise and negotiation has seen the implementation date shift a number of times. Finally, it looks as though the date has now settled on 1st January 2016, 2 years later than the last "go live" date of January 2014.

An Overview of Legal Entity Identifiers (LEIs) The Legal Entity Identifier (LEI) is designed to create a global reference data standard that uniquely identifies every legal entity, in any jurisdiction, that is party to a financial transaction. This captures legal entities at every level in an organisation's structure, from the ultimate parent downwards. Such an identifier for each legal entity should allow regulators to conduct more accurate analysis of global, systemically important financial institutions and their transactions with all counterparties across markets, products and regions, allowing regulators to better identify concentrations and emerging risks. It will also allow local regulators to realise these same benefits. For risk managers in financial institutions, the LEI will increase the effectiveness of tools aggregating their exposures to counterparties.

Another KID on the Way The European Parliament is proposing another key information document (KID) for retail investment products which includes investment funds, retail structured products and certain types of insurance contracts used for investment purposes. Such products are essential for investors to build up savings and investments however such investors often are confronted with confusing and overly complex information, especially in relation to the risks and costs involved with such investments.

Selecting an AIFMD Depositary, Considerations for Alternative Investment Managers Reassuringly, given the fast approaching target date of the 22nd January 2014 for firms to submit their AIFMD application to the FCA, the majority of firms who participated in our AIFMD survey indicated that they are now clear on the AIFMD depositary requirements. However, so far a relatively small proportion of the respondents have actually appointed a depositary.

Pragmatic Steps to Reaching AIFMD Compliance The Alternative Investment Fund (AIF) passport available to fund managers by the Alternative Investment Fund Managers Directive (AIFMD) offers fund managers an excellent opportunity and is key to optimising marketing capabilities, streamlining operations costs and ensuring greater profitability. The main advantages of the passport are that it will establish a clear, standardised procedure with reduced time scales, enabling managers either to manage EU AIFs in other member states or to market EU AIFs across Europe, thereby removing the complexities and challenges of the national private placement regimes.

AIFMD Case Study The manager is a non-EU fund manager with a UK subsidiary authorised with the FCA to establish and operate unregulated collective investment scheme and manage investments and is currently marketing proposed new funds throughout Europe via its MiFID pass-porting rights and national private placement regimes. In support of its European expansion plans it was vital that the manager could continue to market its proposed new funds throughout Europe during the AIFMD marketing transition period. The manager sought authorisation of its UK subsidiary as an Alternative Investment Fund Manager and was one of the first fund managers in the UK to submit its application to the FCA for a Variation of Permission to become authorised to act as an AIFM.

The Trouble with KIIDs ISC have just completed a project for a well known asset manager to recommend and employ an alternative operating model for the production of their Key Investor Information Documents (KIIDs). In successfully completing the project, we uncovered some interesting points worth sharing.

Musings on Solvency II – A follow up In the past few weeks, the European directive: Solvency II has made its way to the front page of the broadsheets and lead item on the evening news. Prudential is threatening to relocate to the Far East and the deputy Governor of the Bank of England warning of the increased costs associated with Solvency II and of regulators 'drowning in masses of data'...

Solvency II – The Chinese Blessing Following on from the crisis of 2008, the Investment Management industry has been buffeted by a raft of further regulation and oversight designed to make the industry more transparent and ensure it can face the next wave of market stress, in whatever form that might come. Solvency II is one such initiative...

Data Management

Blockchain - A Beginner's Guide Blockchain has been heralded as one of the most fundamental technological innovations ever, even more so than the creation of the internet. It represents revolutionary if not evolutionary opportunities in a multitude of industries to remove the need of a trusted middleman and applies authenticity through the distributed nature of the network supporting it. While the technology behind it may appear quite mysterious and difficult to comprehend, it is relevant and will affect the investment management industry on many levels and therefore needs to be understood.

Exploring Data Governance Data; It provides a granular activity for analysts, whilst being a component of every project, an underestimated cost and is essential in facilitating internal and external communication. As an industry we need to appreciate the positive consequences of managing data efficiently and the negative consequences of managing data badly. How then to get it right, first time every time?

Data Governance and Management Survey Results Earlier this year (2013) we launched a survey that researched data management projects and the governance of data within asset managers. The results of the survey regarding the data management projects were consistent with our recent experiences. Data projects are in the main strategic and large, with most respondents describing a multi-year, £1m + project. The respondents confirmed a near 50:50 split in using a third party product at the core of their project versus a proprietary solution.

Why managers should demand consolidated positions data Consolidating positions data is a particular challenge to all Investment Managers. A common perception is that positions are reflected in the back office record keeping system that promotes a start of business feed to support the daily activity in the front office...

Data Management Challenges - A Vendor Review Interest and debate concerning Data Management continues and shows no sign of abatement. Following a year of turmoil during which many in our industry have been forced to re-examine priorities and budgets, we took the opportunity to pose a short series of questions to some of the leading data management vendors to assess their views on the state of the market and their thoughts on the immediate future. Our thanks go to Cadis, SmartCo, GoldenSource, Asset Control and Eagle for participating...

Successful Data Management Projects Data Management has been the subject of increased focus in recent years. Many firms have realised that without a coherent data management strategy, success in a wide range of projects cannot be guaranteed.

The drive to scalability in Data Management What is driving this? Strategic thinking and planning. Strategic initiatives are being instigated by IT departments, however most of these initiatives are being driven by the business. For many years the business has had to support multiple similar initiatives with scarce resources with the consequence being the business is forcing prioritisation and more strategic thinking...

11 Reasons Why Investment Managers Are Demanding Consolidated Positions Data Positions data manifests a firm's investment strategy and demonstrates its performance. It also can reveal a firm's exposure and potential risk through a variety of aggregation techniques. Because of diversity across instruments, businesses and regional requirements, as well as corporate reorganizations, firms frequently have multiple transactions software and data solutions. It is a challenge for institutions to bring together the data repositories backing these solutions to get a "big picture view" of the firm's holdings, its risk, and its overall exposure. This big picture view also assists management make risk / reward tradeoffs.

Operational Outsourcing

Response by the IMA: To the “Dear CEO” Letter on Outsourcing Risks ISC's newest recruit, Julian Baines, has recently finished in his role as Chair of the IMA Working Group (Operations) leading to the publication of a white paper in response to the Financial Conduct Authority's (FCA) "Dear CEO" letter on outsourcing risks. The IMA white paper can be downloaded from the IMA website.

Component Outsourcing – If BMW can do it can our industry Outsourcing is now a mainstream activity. Custody has been run by third parties for decades and the acid test of a mature outsourced service is the ease with which the operation can be transferred to a new supplier. Transfers of investment books between custodians are efficient and the expectation of success means this process rarely hits the operational risk register...

Investment Operations Outsourcing – Outsourced and Isolated Over the last decade the out- sourcing of investment management functions has matured from the provision of custody services and net asset value (NAV) calculations, to complete lift-outs of back offices and transitions to full competency enterprise platforms...