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The "average" investment firm spends 10.5% of its operating costs on IT

The "average" investment firm spends 10.5% of its operating costs on IT

As the 2017 budgeting process concludes, firms want to ensure that their IT budget is the right size to support their current platform and to fund new projects.

 

On average firms spend 10.5% of their operating costs on IT, but this statistic in isolation will not help set a budget. Firms with a high level of automation may find that a higher proportion of their spend is on IT. Firms whose products rely on a high level of personal activity (such as company research visits) may spend more on staff and activities not yet automated. Therefore, it is crucial to understand the intensity and scale of IT in a business context.

 

In this year’s benchmarking, we highlighted how firms with high automation will usually be running low bp rate products and may run very large AUM at relatively low fees. The high-touch firms will tend to have far smaller AUM yet are running at a higher bp rate. The result is that a firm running £500bn of passive/tracker products may have the same revenues as a firm running £50bn of high-touch products and yet in relative terms (IT as a % of Opex) they may be spending four times as much on IT.

 

For more information on Investit’s Competitive Intelligence benchmarks, please contact Emma Haffenden at +44(0)20 7933 9923.

 

 

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60% of firms are adding pre-trade collateral cost analysis capabilities

60% of firms are adding pre-trade collateral cost analysis capabilities

Increasing margin requirements on both cleared and non-cleared derivatives will have a much greater impact on performance returns. Portfolio managers require access to data and robust analytical tools to understand the impact of collateralisation on the cost of a derivative trade throughout its life cycle.

From a recent Investit survey, 60% of firms are adding new capabilities in the front office to support pre-trade collateral cost analysis to guide investment decisions. To address these demands, vendors offering derivatives solutions are enhancing their products with new functionality. This projects the cost of collateral and provides comparison across various trade scenarios to enhance investment decisions and best execution practices.

In the latest Intelligence report on Collateralisation: Understanding the Impacts of Regulation, we share insights on how Investment Managers are addressing the increasing cost of collateral under new regulation and highlight vendor solutions in this area. For more information on how you can join the Investit Intelligence membership, please contact Sarah Hughes at +44 (0)20 7933 9905.

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