PAG, one of the world’s largest Asia-focused private investment firms, with $40 billion of capital under management worldwide, has selected Broadridge Financial Solutions to upgrade its portfolio-management systems.
The win for Broadridge, a $4.5 billion global fintech leader listed on NYSE, encapsulates many of the trends now driving technology in financial services.
First, PAG is adopting a cloud-based solution.
“The greatest new flow of trading activity into 2021 from a technology perspective is cloud, and the full adoption of cloud-based solutions,” said David Becker, managing director and head of Asia Pacific at Broadridge, in Singapore.
Broadridge has a strategic relationship with IBM for public cloud services, and is also a partner of AWS. It uses these relationships with cloud vendors to deliver artificial intelligence, blockchain, and other next-gen tech solutions to financial institutions.
Cloud-based data storage and computing proved itself in the early months of 2020 amid record levels of market volatility. Combined with the need to upgrade tech stacks to account for work-from-home and other new realities, financial institutions will migrate as much as they can to cloud, be it on prem or accessed publicly.
The second trend the PAG mandate represents is the growth of private markets. PAG will be using Broadridge’s Sentry software to manage its private debt operations.
Institutional investors are pouring capital into private markets because they offer superior returns. Five years ago, private debt was a roughly $400 billion asset class, but it is projected to grow to as much as $1.4 trillion in the next three or four years. It remains underserved in technology terms, however, in part because of the complexity of its underlying loan structures.
“Private debt in Asia has provided significant opportunity for firms that can manage the complexity inherent in these markets,” said Derek Crane, COO at PAG. “The support of Broadridge’s technology will help us as we position ourselves for the next phase of growth.”
Kurt Eldridge at Broadridge says many participants in private markets are small firms that have had to process everything manually, even to the point of relying on faxes.
The industry will need automation if it is to take advantage of the coming growth. “We’re helping the industry standardize,” he said, including by enabling asset managers to seamlessly communicate positions and risk profiles to their investors.
The third trend epitomized by the PAG win is the growth in Asian capital markets, and the subsequent demand by many regional institutions to capture that growth by putting their technology on a proper footing.
Several stock exchanges in Asia Pacific are driving innovative blockchain-based projects that will transform financial markets. Broadridge is involved in many of these in areas such as proxy voting and issuer services, or indirectly through partnerships with other providers of distributed-ledger technology.
It is pioneering its LTX corporate bond trading service, which uses A.I. to source liquidity – a big pain point in Asian fixed income. LTX goes beyond merely automating requests for quotes and gives traders transparency over prices and control over information leakage.
Broadridge is also rolling out DLT-based solutions for repo trades that will expand securities lending to Asia, allowing the region’s financing markets reflect the size of its capital markets.
David Becker says 2020 has seen Asian capital markets assume their rightful place, with blockbuster IPOs and the expansion of flows in and out of China. Now Asia’s financial industry is on a breakneck drive to digitize. With emblematic mandates such as PAG’s, “We’re meeting the moment for clients in Asia Pacific across the capital markets and asset management, where firms are looking for scalable, resilient solutions,” he said.