As 2023 comes to a close, we are looking back at insights from the FundGuard team and reflecting on the industry’s ongoing digital evolution and technology transformation.
This week we invite you to take a look at our 23 top takeaways from FundGuard’s 2023 thought leadership contributors, including Lior Yogev, Kirk Littleton, Alan Schneider, Peter Muldoon, Yaniv Zecharya, and John Lehner.
Stay tuned through the end of December for more insights, including our Top 5 Most Read Blog Posts of 2023 and Predictions from the FundGuard team for the year ahead.
1. Adopting Comprehensive Data Manufacturing Models is Vital
Kirk Littleton kicked off the year with the Smarter, Better, and Faster Investment Accounting series, showcasing the need for comprehensive data manufacturing models.
In Kirk’s own words:
“It is FundGuard’s view that organizations need to adopt an investment accounting approach that is based on a comprehensive data manufacturing model – one that is not reliant on other accounting systems. This is the path to achieving true real-time front to middle to back-office integration that will drive operational efficiency and scalability.”
Organizations harnessing the power of manufactured investment accounting data can not only improve front and middle-office operations but also enhance their approach to IBOR.
2. Monthly Software Updates Enable Safer Incremental Change
Earlier this year, FundGuard’s Yaniv Zecharaya shared valuable information to help dispel the myths about frequent software updates.
By leveraging blue-green deployment, organizations can update software more frequently and with greater ease and efficiency – without having to overextend staff or resources. And while reduced downtime is certainly an advantage of more frequent updates, it is the advantage of the reduced overall risk that really stands out because developers can identify and correct small issues before they evolve into major problems.
3. A Single Source of Truth is Key to Real-Time Investment Accounting
What is the solution to cumbersome investment accounting processes?
According to FundGuard president John Lehner, the key to such a solution lies in a single source of truth.
“Organizations that have worked their way down the technology stack, attempting to digitalize from top to bottom, are now realizing that like a house, they need to put the foundation in first and then build from the bottom up.” — John Lehner
Digitalization must begin from the back office and work its way forward, providing all functions with a single source investment accounting data from which to draw real-time insights.
4. A Single, Multi-Book Platform More Advantageous for Investment Accounting
In Part 2 of our Smarter, Better, Faster series, Kirk Littleton made the case for why firms should adopt a unified platform solution for investment accounting.
The modern realm of investment accounting relies on real-time knowledge and integrations. As a result, investment firms can no longer support multiple different accounting systems divided by asset class. With FundGuard, these systems can be unified to process all asset classes throughout their full life cycles and enable:
- Lower operational costs without sacrificing innovation
- Integration of new asset classes with greater ease
- Unparalleled speed and efficiency
- Continuous software deployment via a blue-green deployment strategy
- Endless scalability during times of high growth
With the right platform solution, your business can unify back, middle, and front office operations, all while significantly reducing operational costs.
5. Combatting Cloud Concentration Risk Requires a Multi-Cloud Approach
Though cloud migrations are a key component of investment accounting digitalization, regulators continue to warn of cloud concentration risk. To solve this complex problem, FundGuard’s Yaniv Zecharaya and Elad Dotan emphasized the need for a multi-cloud approach to diversify services and ensure your business has secondary providers to turn to if your main provider experiences outages or downtime.
6. The FundGuard Partner Ecosystem Enables Mutually-Beneficial Advantages
FundGuard has worked diligently over the past year to strengthen and expand our partner integration ecosystem, providing our collective of clients and certified partners with the core technology needed to modernize and optimize investment accounting.
We believe that operating within a partner ecosystem is crucial to establishing mutually beneficial relationships between the many service providers, software firms, vendors, and the clients they service.
As FundGuard’s Alan Schneider stated:
“— our vision is to create a global utility that will drive a new era of investment management operations for the industry.”
7. Multi-Tenant Software Emerges as an Essential Resource for Clients
FundGuard’s multi-tenant architecture is one of our many distinct capabilities, and for good reason. In a Tech Talk with Yaniv Zecharaya, Yaniv pointed out the key advantage that makes the multi-tenant architecture so valuable — the ability to enable all clients to benefit from software updates while maintaining their freedom to customize their unique deployments.
Our multi-tenant approach is not only cost-efficient and essential for streamlining operations, but can also be a vital technology for optimizing investment accounting.
According to Yaniv:
“Investment accounting has historically been a cumbersome process in which collaboration is limited aside from the exchange of data. FundGuard is working to change that with a multi-tenant architecture to give clients the best opportunities to participate in advantageous deployments.”
8. The Need for a Cloud-Based Investment Accounting Core Grows
The value of a single source of investment accounting data across the enterprise is clear, but what does establishing such a feat entail?
In a summertime talk with Alan Schneider, we explored FundGuard’s role in order management systems and how our platform can create the ideal source of change.
During this discussion, Alan hit home on the need for a cloud-based investment accounting utility that can act as the system core, aligning technological needs with in-depth industry knowledge and business management.
9. Artificial Intelligence Enables Smart Investment Accounting…
Artificial Intelligence (AI) is easily the buzzword of the year in 2023, even ingratiating itself into the traditionally risk-averse asset management space.
In July, we sat down with Yaniv Zecharaya once again to chat about the role of AI and machine learning (ML) in building smart investment accounting systems. According to Yaniv, these “smart systems” enhance processing capabilities, allowing firms to integrate both traditional statistics and ML models.
As a result, smart investment accounting systems can increase efficiency and accuracy, as well as reduce manual and error-prone work in various data processes.
10. …& Smart Investment Accounting Enables Tailored Recommendations
By enabling smart investment accounting systems via AI and ML, you can automatically investigate and validate common valuation anomalies. Moreover, you enhance your security and compliance model, improve decision-making processes, and even personalize your results.
According to Yaniv:
“Today’s advancements in AI enable smart systems to not only automatically perform statistical analyses but to also learn from the results and generate tailored recommendations. And where accounting controls have historically been reactive, in the new era of smart investment accounting, it is now possible for those controls to be preemptive.”
11. The Zero Trust Approach Arises as the New Standard for Security
Why is it that FundGuard’s Yaniv Zecharaya and Elad Dotan sing the praises of the zero trust approach?
For starters, the zero-trust approach is vital for honing in on the complexity of user authentication, especially in today’s increasingly digital investment accounting space.
Yaniv and Elad highlighted the core reason why a zero-trust approach is a necessity:
“While most companies today still rely on VPN clients for their cybersecurity needs, it is becoming increasingly clear that a zero trust approach is the best practice for both safeguarding business systems against bad actors — and, thereby, keeping both internal and external data secure.”
12. The Critical Importance of Accuracy in Performance Measurement
“Accuracy is a necessity within the performance measurement process.”
This point, made by FundGuard’s Alan Schneider, ring true when it comes to uncovering data and data management issues via performance measurement. Oftentimes, these issues are born from peripheral data, reiterating the need for timely and accurate performance processes.
With the FundGuard investment accounting platform, firms can manufacture trustworthy and accurate data from the start, improving data management and performance measurement processes along the way.
13. A Modern Streaming Framework Emphasizes Real-Time Processing
Is your investment accounting database framework capable of real-time precision?
In a comparison of traditional relational database systems to FundGuard’s streaming entry and record immutability data architecture, Peter Muldoon highlights how the FundGuard architecture emphasizes real-time data processing, scalability, and quick analysis of current and historical data changes.
Through a streaming architecture approach — like FundGuard’s — data can be both processed and ingested as a continuous stream, creating an immutable data record.
14. All-in-One Platforms & Embedded Testing Tools Simplify Testing
Another key point from Peter Muldoon’s comparison of FundGuard’s modern architecture with traditional databases is the need for all-in-one platforms and embedded testing tools.
Within the comparison, Peter notes:
“Ensuring that events are correctly processed using different sets of configurations, and that the system behaves as expected, requires a specialized Test Center where testing tools and approaches let users load and reload their own test scenarios with their desired configurations, and includes an auto verification of test results.”
FundGuard’s Test Center enables all the necessary components for simplifying the end-to-end testing and debugging process.
15. End-to-End Digitalization Optimizes Front-Office Data Management
Digitalization is more than just an aesthetic choice — it’s crucial for front-office functionality.
In a September Q&A with Alan Schneider, we dove into the often-overlooked importance of investment accounting in front-office processes. Regarding buy-side firms that focus too much of their digitalization efforts on front-office optimization, Alan equated the choice to “putting lipstick on a pig,” stating:
“— buy-side firms are placing too much emphasis on creating a visually appealing and easy-to-use front office without considering the optimization of the data. In many cases, ‘data management’ means repairing the many legacy activities that manufacture the information. And the front office continues to suffer.”
By comparison, FundGuard enables buy-side firms to capture data at the source and can achieve fit-for-purpose results for the front office.
16. Embracing ABOR Requires a Shift Away from Legacy Tech
A post-trade survey conducted in 2023 by Nasdaq and VX cited the tech “legacy issue” across the FMI ecosystem.
In response, we considered the role of the Accounting Book of Record (ABOR) ) in post-trade processing, and the importance of a modern tech stack to ensure the necessary resiliency and scalability of today’s FMI systems. As Alan Schneider noted,
“An accounting book of record is a foundational component of an FMI (Financial Market Infrastructure), ensuring the accuracy, reliability, and efficiency of financial transaction processing across the financial markets.”
17. Immutability Enhances Software Development & Data Management
The term “immutability” is a common data management buzzword,, but what does it really represent for investment accounting technology?
In a November Q&A, FundGuard’s Peter Muldoon showcased four vital benefits immutability can offer for software development and data management in investment accounting:
- Immutable data ensures field values remain constant and predictable throughout their lifetimes
- Immutable data guarantees a field’s state cannot be inadvertently modified
- Immutable data simplifies versioning by keeping previous versions of data intact and accessible
- Immutable data enables more efficient concurrency and parallelism in applications
18. NoSQL Databases are the Key to Real-Time Calculations
Compared to traditional SQL databases, NoSQL databases can build systems from the ground up and solve for the end-point — the “pinnacle calculated values,” as Peter Muldoon calls them.
According to Peter:
“NoSQL databases are always calculating for the endpoint, enabling real-time capabilities to perform all of the necessary calculations for any given scenario in one fell swoop.”
By contrast, traditional SQL-based systems involve many disparate processes that decrease overall efficiency and cost-effectiveness.
19. Fund Board Members Must Focus on Reducing Costly Tech Redundancies
In a recent article with Fund Board Views, FundGuard’s Kirk Littleton called on independent fund directors to reduce costly tech redundancies within their investment accounting systems.
For directors and fund managers, the challenge lies in alleviating costs and challenges associated with technological redundancies.
As Kirk highlights, addressing these redundancies requires a strong set of best practices that cover:
- Integration and simplification
- Cost analysis
- Operational efficiency
- Vendor management and software licensing
- Market data utilization
- Risk and compliance
20. Addressing Scale & Modernization Must Begin at the Granular Level
In an interview with Future of Finance, FundGuard president John Lehner explained FundGuard’s vision for a modern, scalable utility for the entire investment accounting space.
According to John:
“ Looking at the inefficiencies and fragmentation, as well as the legacy technology that’s been out in the industry in some cases 40 almost 50 years, we think that the root of addressing scale and addressing modernization starts at a very low level, a very granular level, and so we are choosing to attack all of those issues from the bottom up by building out our new software platform.”
21. Stagnation Drives Up Costs, While Migration Facilitates Growth
Waiting to innovate and hesitating to adopt new technologies only leads to stagnation, according to FundGuard’s Kirk Littleton.
“Migrating to cloud-native operations is crucial to achieving a total digital transformation, and while the journey is undeniably challenging, the alternative—sticking with status quo legacy systems—is downright perilous,” Kirk reveals in a September post.
The time is now for your business to look ahead to the future of investment operations — and beyond the confines of legacy technology.
22. Legacy Tech is a Business-Wide Challenge
Along with the need to migrate to cloud-native operations, Kirk Littleton further comments on the necessary evolution away from legacy systems by stating:
“It’s imperative for businesses to recognize the signs of a software vendor that is on its last legs and make informed decisions for their future. The slow death of legacy software is not just an IT issue—it’s a business one.”
Outdated technologies take a tremendous toll on your operations, presenting active risks to overall business continuity, security, and growth.
23. Our Industry is Ready for Change
The asset management and investment accounting spaces are long overdue for a digital revolution.
New technologies like FundGuard’s investment accounting platform present a bright future for the industry — and partners of all kinds are ready to embrace this change.
As FundGuard’s CEO & Co-Founder Lior Yogev wisely states,
“If you build it, they will come.”
Thank you for sticking with us until the end, 2024 is going to be an excellent year.