Front to back outsourcing / Externalisation front to back
The search for optimal operational efficiency and increasing regulatory constraints are driving more and more asset managers and institutional investors to outsource all or part of their front-to-back operational chain.
Let's review the four main parts of the front-to-back process for an institutional client, such as an asset manager:
The asset manager is the one who will decide to buy or sell certain assets (stocks, bonds, etc...) within the fund he manages. He will have to determine not only what he will put in his portfolios but also the proportion in order to maximize his return while reducing his risks. To do this, he will need a portfolio management tool, but also an order management and compliance tool.
Trading & Execution
Once the order is placed, the client needs to ensure that the order will be executed at the best conditions. That is to say, for example, at the best price, with a minimum split and as quickly as possible. To do this, he will need a routing and execution service to ensure that his orders are directed to the market offering the best conditions.
Then the transactions will have to be managed: confirmations, settlement / delivery, etc...
Finally, the purchased securities will have to be kept. This is the role of the custodian. In the same way, the manager works within a regulatory framework that requires him to have an external control so that his clients' money is managed according to the rules established in the fund's prospectus. It is the custodian who controls the regularity of management decisions.
A fund is a legal structure requiring accounting, tax and regulatory management. It is the fund administrator who will take care of these functions.
Similarly, the fund can be distributed to the general public via distributors (banks, asset managers, brokers). It will therefore be necessary to manage the remuneration of these distributors. This is the role of the transfer agent or centralizer.
In short, there are many tasks to manage, many of which are administrative tasks. For many years now, asset managers have been concentrating on their core business: making management decisions and delegating to others a very large part of the administrative management of their operations. This is the outsourcing of the front-to-back process.
The Group's Securities Services branch, Societe Generale Securities Services, offers its clients a fully integrated solution covering the entire value chain in all markets and for all asset classes: CrossWise by SGSS.