Aladdin Value Delivery
Transformative Drivers in Investment Operations, Aladdin and eFront
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Aladdin Value Delivery: Transformative Drivers in Investment Operations
Structural Change in the asset management industry is a key driver for your technology strategy and your Investment Platform selection. In this article, we explore how Aladdin and Strata can help Asset Managers deliver value-add, aligned to the overall investment strategy of the firm.
Let’s first explore a number of the observed drivers in industry:
- Asset Owners are increasingly looking for fewer asset managers to service their needs i.e. doing more with fewer partners. This in turn allows them to drive better discounts on Management fees and demand more value especially in areas of Client Experience. Asset managers are, as a result, looking to win bigger deals across a more diverse range of assets for lower fees. The ability to deliver that, requires a highly skilled team as well as an investment platform that scales and supports a diverse range of asset classes and products.
- Talent cost increases
- Talent pool needs to do more with less
- Technology needs to scale, and deliver efficiencies in support of this
- Asset Managers need the ability to access their investment related data to deliver digital reporting solutions for the best client experience
- Passive beats Active, the evidence gets stronger every year that Beta strategies are a cost-effective approach for investors. Managing ETF Strategies (incl. Active) Beta or Index products requires highly effective portfolio construction techniques as well as optimisation to replicate the indices in question. The fewer transactions required to deliver the Index return and the better operational efficiency and STP, the better the ability of the manager to deliver the product at the required lower management fee.
- Investment platform to deliver optimised index portfolios at scale.
- Downstream STP to drive lowest cost with the fewest errors.
- The search for Alpha has made Alternatives less alternative. Investors have been on a relentless search for Alpha over the last 10-15 years including the low yield period following the global financial crisis right up to 2022. This meant increasing allocations to Private Credit and Loans, Private Equity as well as Infrastructure investments. This trend is accelerating. As a result, the lines are continuing to blur between private vs public investments, driving higher allocations on Alternatives in multi-asset products including retail investors.
- Innovative investment solutions require easy access to data and transparency to underlying investments and risk.
- Alternative investments have complex ownership structures and capital flows. Asset managers need a platform to support these nuances whilst also making the data accessible downstream for consolidation into a whole portfolio solution for optimised operational efficiency and investment risk transparency.
How does Aladdin® and Strata help your organisation respond to these challenges?
Delivering Scale to the Operating Model
Aladdin is a front-to-back investment management platform delivering your PMS, EMS, IBOR as well as ABOR (optional), a one-stop solution supporting the entirety of the investment management lifecycle. It is multi-asset in nature and integrated with eFront’s similar capabilities across private markets to deliver a one-stop shop for Alternatives. It was developed in support of BlackRock’s growth including their Ishares index business, so not only does it support front-to-back, but also the asset classes, investment styles and products delivered across passive and active styles.
Aladdin was developed as a hosted service by design, allowing the platform to be delivered to scale for the end client. Today this has evolved to a cloud-based solution, creating several operating models, that we at Strata help deliver for our clients.
- In-house Operations on Aladdin but with the ability to near-shore or off-shore as the client sees fit to create Centres of Excellence (COE). From a target operating model (TOM) this provides a great way for Asset Managers to find the best fit for access to the right talent pool, in the most cost-effective location.
- Outsourced operations with your asset servicer, Aladdin Provider was developed to allow for the Asset Servicer to directly integrate and work on the Client’s Aladdin from a workflow and data sharing perspective. This vertical value chain integration, offers clients additional flexibility on their TOM to achieve the best scale vs cost solution. Additionally, with the hosted service delivery the asset servicers can also take on other functions, e.g. Aladdin Accounting taking control of the NAV oversight combined with existing Fund Accounting functions.
Selecting Aladdin as your investment platform is largely, the outsourcing of your core investment management technology. Aladdin’s roadmap is evolving in response to clients, markets and regulations. We see Asset Managers needing to adopt ongoing optimisation as part of their pursuit of operating model scale.
Organisations are in a constant state of flux responding to their operating environment. The TOM on Aladdin and eFront is no different, and every part of an organisation’s strategy and core operating model is impacted by this change. As such, at Strata we recommend that clients regularly assess their Aladdin and eFront footprints and value delivery to the organisation.
The assessment can be thought of as a Health Check, separated into 2 types of deliveries
- Quantitative assessment: Developing key performance indicators across front, middle, and back-office operations.
- Qualitative assessment: Evaluating key workflows across all teams.
At Strata we have developed frameworks for both of these assessments. Defining KPIs should not be a one-off exercise, but a framework of continuous assessment – a KPI Dashboard solution.
Our qualitative assessment is less frequent and takes the form of a review of the clients’ Operating Model, adoption of Aladdin and eFront functionality and capabilities across workflows front-to-back. We recommend this 3-5 years after go-live, and after or in conjunction with significant operating change events.
Operational KPI Dashboard - Defining what Good vs Bad looks like
Strata’s operational alpha KPI dashboard looks to leverage the client’s Aladdin data, our default delivery for this is via the Aladdin Data Cloud, but can also be done in a client’s proprietary data cloud.
The underlying premise is to help clients understand what they are doing on Aladdin and how well Aladdin is performing from a delivery perspective. The KPIs differ across the functions and across clients depending on their business model, asset and product mix. The most common is post trade execution e.g. same day Trade Confirmation ratios across brokers, asset classes and regions and Straight-Through-Processing (STP) ratios across these.
Manual interventions increase Operational risk, introducing inefficiencies and as a result, extra costs to the organisation. Understanding the drivers behind these and continually searching for operational excellence is what Operational Alpha is all about.
Strata's Operational Alpha KPI Dashboard
Well defined KPIs will allow the COO and CTO functions to be very transparent on the value delivery of Aladdin and eFront to the business functions that use these to deliver their products.
Optimising Aladdin and eFront's Operational Footprint
Strata’s KPI dashboard provides guidance on where and how to review the efficiency of Aladdin workflows, improve the Aladdin configuration or ask for Aladdin development work, and should form part of a continuous KPI framework across the organisation.
After an Aladdin or eFront Implementation there are often project day 2 items that were “out-scoped” during the implementation phase, too often these workflows are left in applications and infrastructure outside of the core Aladdin and eFront platforms. Rationale at the time was likely complexity, time or lack of core support in the Aladdin and eFront functional footprints. Strata’s qualitative health check is focused on optimising the functional footprint of your investment platform, and adoption of new functionality which drives the ROI of your technology investment and enables the organisation to delivery on its overall strategy.
In conclusion, by combining quantitative data analysis with qualitative process reviews, a health check provides a roadmap for ongoing optimisation. It helps identify areas for improvement, from simple workflow adjustments, to strategic shifts in your operating model.
The goal isn’t just to implement a powerful platform like Aladdin – it is to continually refine and adapt your use of that platform to meet changing market conditions and organisational needs. With regular health checks and a commitment to continuous improvement, you can maximise the return on your technology investment and maintain a competitive edge in the investment management industry.
ANDERS ROX HANSEN
MANAGING DIRECTOR, EMEA
Anders brings over 20 years expertise of delivering solutions for clients on the Aladdin platform, from implementations fund migrations, outsourcing risk and analytics and defining the gold standard in Operational Aph. His breadth and depth of knowledge on the Aladdin platform is an exceptional asset to Strata and our clients.
Strata is an independent delivery-focused consultancy specialising in Aladdin, eFront and Data & Analytics.
We are industry practitioners who bring end-to-end strategic advisory and hands-on delivery capabilities to our clients, spanning Wealth and Asset Managers, Asset Owners and Asset Servicers.
Our Team draws expertise from involvement in the majority of all major Aladdin implementations across EMEA in the last 15 years.
- Design and deliver your Aladdin implementation in the most optimal way.
- Gain peace of mind that you are optimising your investment in Aladdin & eFront via our Health Check.
- Create a competitive advantage through your use of data and analytics.
