Citisoft Solutions Market Perspective Series: An Interview with FundGuard’s John Lehner

Written by Alissa Doherty on Oct 31, 2022

We recently had the opportunity to chat with John Lehner, President at FundGuard. It’s an exciting time for FundGuard with their recent announcement of a strategic partnership with State Street and continued investment in their next generation asset servicing operating system and technology platform. Read on for John’s take on these topics and more.


FundGuard was founded in 2018 which sets the company apart from many longstanding industry incumbents. What sort of challenges and opportunities does this present in carving out a niche in a competitive field?

John: I think the challenges and opportunities are two sides of the same coin. The real opportunity is that the industry is ready and starting to move to true digitalization, fueled by new technology at the core of their operating models—and this is a recent shift that we’ve seen accelerate in the last 12-24 months. Before this shift, many firms were using a top-down approach to digitalization by deploying, for example, new portals and reporting tools that leverage cloud technology. Now, I think people are realizing that technology needs to be deployed from the bottom-up in a more strategic way. That’s where the opportunity lies for us.

The challenge sits more so with the incumbent providers because organizations are not simply replacing A with B, they are undertaking a ground-up transformation of their investment management processes that simply cannot be done with legacy technology, some of which dates back 30+ years. The path forward means leveraging a larger ecosystem and it’s really a challenge for organizations to understand how to do that and incorporate it into their own operating model. With this comes a lot of apprehension. There are too many painful memories of people trying to make changes in the past that didn’t work out and, quite frankly, undertaking new transformation initiatives makes people nervous. It’s a journey. It will continue to take some time for mindsets to change and for the industry to fully shift to a new paradigm.’

That’s a really interesting point about top-down vs. bottom-up approaches to digitalization. I’d love to hear a little more about how managers are shifting the way they approach this.

John: Like anything else, people attack the symptoms of a problem and in our industry, the symptom is always data. Data gets blamed for every operational challenge and, more often than not, people attack where data manifests itself. They often don’t look at where data originates from or problems around latency, data structure, or breadth of coverage. It’s like gluing Humpty Dumpty together at the end of a process rather than just not breaking it in the first place.

Today, managers operate in various silos and then try to glue insights together using disparate data sources and technologies paired with great business intelligence tools, but they’re struggling to achieve their end goals. The key is to get data right in the first place. As people work their way down the technology stack and attempt to digitalize from top to bottom, I think they’re realizing you don’t start building a house by constructing the roof. You put the foundation in first. You get the infrastructure right. I think decision-makers are learning that if they want to accomplish a full digital model, they need to start by building an all new foundation.

We talked a lot about data on that point, so it segues well into my next question. With the emergence of new technologies that improve data access and cross-functional collaboration, how do you see asset managers’ operating models evolving?

John: New tools that help asset managers navigate the business—whether it’s risk or trying to monitor assets—simply won’t work with legacy technology. Real-time dashboards are not going to work with a batch system that sends a file once a day. The new breed of sophisticated tools to support decision-making require more refined and structured data to make them work. They’re just incompatible with something that was built 30 or 40 years ago. The advent of new technologies is really starting to highlight areas of the operating model and existing technology ecosystem that are preventing forward momentum.

At the core of operating model challenges is a situation where different parts of the business have vastly different data needs and each set of needs comes with specific data requirements. Legacy systems were built to address these needs separately and that naturally led to operational silos. You have one system to support the front office, another for the middle office and yet another one for the back office, and they’re often all working off variations of data and technology. From FundGuard’s perspective, starting from scratch with one platform that provides data as a single source of truth across these multiple sets of requirements is the only sane and possible way to transform and futureproof.

AI is a really exciting topic and one FundGuard is familiar with. However, many of our clients don’t yet have the infrastructure to fully embrace AI beyond basic process automation. How is FundGuard harnessing the power of AI and what kind of use cases do you envision in the future?

John: This goes hand-in-hand with a lot of the challenges we covered with top-down vs. bottom-up. Similar to the digitalization approach, People have tried to retrofit AI or automation and robotics on top of legacy platforms and perhaps had success targeting some very basic issues around transactions or reconciliations. But it’s very difficult to accomplish true enterprise-AI. One of the biggest issues we see is that all of these legacy AI-overlay applications are individual instances of software and because of that, you don’t get the benefit of true crowdsourcing across front, middle and back office workflows. This can only be achieved with truly cloud native systems that are one code-base and multi-tenant. With siloed legacy systems, you can’t capture the true power of AI because you don’t have the benefit of scale.

Taking a step back, are you seeing increased cloud adoption among institutional asset managers? Are leaders now embracing a full-scale move to the cloud, or do you think it is more experimental?

John: Yes, absolutely. I remember a meeting four years ago with an asset manager where somebody said, “we are using cloud in production.” It completely threw me off because I’d been waiting to hear that from somebody in this space for years. Fast forward to today and you have countless firms that have gone far beyond experimenting and have cloud mapped into their production model. The majority of inquiries we’re getting are from firms who have made it a requirement to be cloud-native.

I want to emphasize that point: cloud native. Any platform can be “in the cloud.” You shove it in a container, you put it on the cloud. But that’s not the same as being cloud native. It’s a significant distinction. We’re currently on the front side of the bell curve attracting the industry innovators, but I see cloud adoption quickly shifting from wait and see to now being an absolute requirement. Today, no one is going to green light a project that doesn’t have cloud native components to it.

In October, you announced a strategic partnership where FundGuard will provide accounting solutions for State Street Alpha. This is big news for FundGuard and for the industry—can you tell us more about this partnership and what State Street Alpha clients can expect in the future?

John: We are very excited to be partnering with State Street in providing accounting solutions for State Street Alpha. Their scale and breadth in this space is unparalleled and it makes senses to bring FundGuard’s cloud native platform to the table to help asset managers and asset owners leverage that expertise and scale.

The FundGuard accounting solution will be integrated for straight through processing from portfolio management and trading in the Charles River Investment Management Solution through to custody and administration. A co-engineered, technology-only solution that spans front office and accounting capabilities will also be natively available within the platform for Charles River clients.

State Street’s technology has enabled clients to be more operationally efficient and bring new and innovative products to market faster. Accounting services are a fundamental pillar of Alpha, and embedding FundGuard’s capabilities into the platform will provide State Street’s clients with the critical data and real-time insights they need to transact and better understand the performance of their investments.

We like to keep a pulse on the conversation around crypto, ESG, AI, and other emerging trends in our industry. What trends or themes are top of mind at FundGuard and which do you think will drive your platform’s evolution in the years ahead?

John: That’s a big question so I’ll start with crypto. Remember when the industry was confronted with Y2K? There was a lot of recoding because systems and software weren’t programmed to roll over to a zero zero. Crypto reminds me of that in a lot of ways—the volume of transactions and the level of detail within the data is beyond anything that looks like a traditional asset and that’s already a problem for legacy architecture. And folks are now thinking, “well wait a minute, that’s just crypto as an asset. What’s going to happen when the whole life cycle becomes distributed ledger and this whole thing is moving in real time? We need to get ready.

With ESG, you have an incredibly complex data exercise that is evolving but at its core, it’s the requirement of how you’re conforming and performing against requirements across the investment lifecycle. People are really, again, struggling to retrofit that on top of a legacy stack. Same with AI as we chatted about earlier. Legacy applications were never built to understand the complexity of today’s data requirements or the frequency that reporting needs to happen.

People need to be learning about how to become digital and how we work together as organizations to build a new normal in technology and operations. The industry needs to become collaborative because 90% of what the firms all do is common and that 10% differentiation about providing the returns for clients is a very thin layer. Firms already kind of know this and I think that’s why they’re increasingly turning to outsourcing or moving to common platforms or utility models. We should all be working on these challenges together and we’re excited to play a role in helping the industry get there.

Thank you for the time and insight—it’s such an exciting time in our industry. It was a pleasure to talk about your vision for the evolution of technology and get a glimpse at things to come.

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