Asset-management companies are starting to incorporate big-data analytics and the artificial-intelligence tools to drive efficiencies and improve portfolio performance.
The Investment Management Association of Singapore (IMAS) sponsored a fintech accelerator program to help match tech startups and asset managers.
We profile what Schroders and Nikko Asset Management are doing as a result, as well as IMAS’s own fintech initiative. A previous story looked at Franklin Templeton’s own initiatives.
Schroders: fund admin
Schroder Investment Management conducted a proof of concept with Nexus FrontierTech to automate workflows – a solution that is now going into deployment.
Chwee Chua, global head of cognitive science and automation for operations at Schroders, says the firm is using natural-language processing developed specifically for fund accounting. The NLP, built by Nexus FrontierTech, incorporates both Schroders and third-party data to develop workflows for teams in Britain and Singapore.
“We’ve developed ways to scale the results across business units,” Chua said. This results in time savings, reduced risk, and improved productivity. “We can scale operations without sacrificing quality of service to clients,” he said.
Danny Goh, founder and CEO of Nexus, says fintechs can’t write code to solve a lot of automation problems – because they don’t understand the nitty gritty of financial operations. The expertise lies within asset management companies. Moreover, proprietary data is sensitive and can’t easily be handed over to a vendor to manage.
But NLP enables its users – in this case, Schroder operations teams – to train with it and provide feedback. “Initially the accuracy wasn’t great,” Goh said. As Schroders teams engaged with the software, however, results improved. “Users are leading the change,” Goh said. “This solves the black-box problem of AI, because this isn’t something created in lab. This shows the need for collaboration between clients and fintechs.”
Chua noted the firm had attempted to work with a variety of bigger vendors, including AWS and Microsoft, to automate fund accounting. But off-the-shelf products weren’t good enough, or couldn’t scale.
“We look at solutions that can be applied groupwide,” Chua said, noting the NLP technique isn’t limited to operations. It can also work in legal, compliance, and other functions that require crunching big data sets. “We intend to leverage this as a strategic solution.”
Nikko Asset Management: procurement
Nikko A.M. is working with Stradegi, a fintech that provides no-code software to enable clients to configure workflows.
In Nikko’s case, it is using the software to assess risk of potential vendors and outsourcing providers.
Kenneth Lim, COO for Asia ex-Japan, says outsourcing is a complex task that must be compliant and pass muster among multiple stakeholders, including regulators.
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“How do we give control functions [such as compliance and operations] the ability to define processes, set standards, and set baselines that can be enforced?” Lim said. “Then we need to coordinate multi-stage approvals among stakeholders.”
It tapped Stradegi to use its nFlows product, a no-code portal through which Nikko’s people can design their own procurement processes. The portal avoids the security risks of email, while allowing for an auditable record as Nikko staff rate potential vendors for both qualitative and quantitative capabilities.
During a proof of concept, Stradegi trained Nikko’s teams to build their own processes. “This can be used to streamline other things, like client onboarding,” Lim said. “That’s our next use case.”
Paul Joseph, founder and managing partner of Stradegi, says nFlows lets clients capture data points, design a user interface, set business rules, and define the logic to validate the data. It’s all done by clicking and dragging visual cues on screen. Once data is captured, it can be easily turned into reports, dashboards, and analytics.
“Nikko let us use our full capabilities,” Joseph said.
He says nFlows won’t replace an asset manager’s core systems for trading, portfolio construction or settlement, but it can digitize many auxiliary activities.
“Digitization and automation are still done through Excel and emails,” Joseph said, including distribution, client servicing, product management, compliance checks, data management, and reporting. “These aren’t core functions, but they’re still important, and they need a governance framework.”
So far a barrier to automation has been bespoke solutions based on certain activities, which is expensive and cumbersome to integrate. Stradegi’s software is flexible enough to let users customize it across different functions, under one platform.
“We use big data technology to build fully fledged apps for all of these functions, quickly,” Joseph said. “Users don’t need us to build the solution – they can build their own use cases.”
IMAS: financial education
The association has turned to gaming to try to educate Singaporean retail investors about the basics of investing. With input from the Central Provident Fund, SGX, and MoneySense (a government agency dedicated to financial literacy), IMAS worked with Optimize, a game developer, to come up with its own product. Amundi and AllianceBernstein funded the project.
“The game operates on real financial events and prices,” said Oh Sok Keng, who developed the game at Optimize. She says the company worked with asset managers to replicate real-life decisions in a fast-paced gaming environment. “The game takes you through real events like the global financial crisis and US-China trade wars, so you can observe asset volatilities and recoveries,” she said. “The goal is to show the importance of staying invested and diversified.”
The game is called LIT (Let’s Invest Together) and is aimed to be integrated with marketing material that fund managers send to their distributors. It could also be sent directly to consumers, although there’s no formal plan to do so.
Nonetheless, Karen Lim, managing director for retail sales in Southeast Asia at AB says the game can supplement traditional marketing activities like roadshows and online events for retail investors.
The game covers asset allocation, risk profiles and other concepts, says Carmen Wee, chairwoman of IMAS. It includes portfolios for equities, bonds, Reits, mutual funds and gold. Future iterations could include retirement planning tools, new asset classes like private markets, or crypto, as well as ESG themes.