Tech Literacy for Fund Boards

May 30, 2024

For fund board directors, investing in technology knowledge is an investment in the future of the asset management industry and an assurance of ongoing due diligence in service to end investors. Yet a recent FundsTech survey cited that a majority of industry participants feel technologists are “underrepresented at the board level,” indicating a gap in tech knowledge and leadership within the sector.

Integration of advanced technologies such as the cloud, artificial intelligence (AI), blockchain, and data analytics is transforming the way asset managers operate, make decisions, and deliver value to clients. As the industry evolves, it is becoming increasingly more important for fund boards to possess a solid understanding of these technological advancements. Here’s why:

1. Enhancing Decision-Making Capabilities

Directors are responsible for overseeing the management and performance of investment funds. With the growing reliance on technology, decisions are increasingly data-driven. Directors with a strong grasp of technology can better evaluate the tools and systems being used, ensuring that decisions are based on accurate and comprehensive data. This capability is crucial for assessing risks, identifying opportunities, and steering the fund towards achieving its objectives.

2. Improving Risk Management

The asset management industry faces numerous risks, including market volatility, cybersecurity threats, and compliance challenges. Technology knowledge equips directors with the ability to understand and mitigate these risks effectively. For instance, being aware of cybersecurity measures and data protection protocols is essential to safeguard sensitive financial information. Additionally, understanding AI and machine learning can help in identifying patterns and predicting potential market risks, enabling proactive management.

3. Ensuring Regulatory Compliance

Regulatory bodies are increasingly focusing on the technological aspects of asset management. Compliance with regulations such as the General Data Protection Regulation (GDPR) and the U.S. Securities and Exchange Commission (SEC) rules requires a thorough understanding of data management and security technologies. Directors who are knowledgeable in these areas can ensure that their funds comply with regulations, thereby avoiding costly penalties and maintaining investor trust.

4. Driving Innovation and Competitive Advantage

As technology continues to evolve, so does the competitive landscape of the asset management industry. Directors who are well-versed in the latest technological trends can drive innovation within their organizations. They can advocate for the adoption of cutting-edge technologies that enhance operational efficiency, improve client experiences, and create new investment opportunities. This forward-thinking approach is essential for maintaining a competitive edge in a rapidly changing market.

5. Enhancing Transparency and Accountability

Transparency and accountability are fundamental principles in the asset management industry. Advanced technologies such as blockchain can significantly enhance transparency by providing immutable records of transactions and fund performance. Directors with technology knowledge can leverage these tools to ensure greater transparency, build investor confidence, and uphold their fiduciary responsibilities.

6. Facilitating Effective Oversight

Effective oversight requires a deep understanding of the tools and processes used by asset managers. Technology knowledge enables directors to critically assess the technological infrastructure and strategies employed by fund managers. They can ask pertinent questions, identify potential issues, and provide informed guidance, thereby ensuring that the fund operates efficiently and effectively.

Future-Proofing with Technology Knowledge

As the asset management industry continues to embrace technological advancements, the role of fund boards is becoming increasingly complex. Possessing a solid understanding of technology is no longer a luxury but a necessity. It empowers directors to enhance decision-making, improve risk management, ensure regulatory compliance, drive innovation, enhance transparency, and facilitate effective oversight. In doing so, they can navigate the evolving landscape with confidence and lead their firms to sustained success in the digital age.

Change doesn’t have to be hard. FundGuard Can Help

FundGuard’s team of industry experts and tech innovators are here to partner with fund managers and their boards as they continue to forge their firms’ paths to technological transformation. By starting with the accounting engine, firms can address critical operational inefficiencies, ensure data integrity, and lay the groundwork for further technological advancements, ultimately leading to a more agile and competitive organization. Get in touch with the FundGuard team to learn more.

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