Sharing best practices in investment management:

SimCorp hosts top industy conference

Senior representatives of the global investment management industry gathered in Berlin for one of the top conferences in 2010, the 13th annual SimCorp Dimension International User Community Meeting (IUCM). Invited by SimCorp along with a select group of academics, industry experts and SimCorp Dimension professionals, delegates spent two fruitful and eventful days together with the purpose of sharing best practices in the new financial environment.

By Rikke Baden

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As the global investment management industry be­gins to find its feet after what has been described as the worst financial crisis since the Great Depression, senior industry delegates met in Berlin for a two-day conference organised by SimCorp, a leading soft­ware provider for the financial industry. The event served as the ideal forum to debate best practices and growth op­portunities in an irrevocably changed environment.

Highly motivated and eager to make the most of this event to share knowl­edge, it was slightly past 10:00 am on Thursday 9 September as the last dele­gates found their seats in the packed conference room at the InterConti­nental Berlin. SimCorp CEO Peter L. Ravn opened the conference, introduc­ing some of the programme highlights reflecting this year’s theme, ‘Sharing best practices’.

With its many sessions and activities, the conference’s full agenda offered par­ticipants a chance to gain penetrating insights into industry challenges from renowned researchers and experts, to learn about the best practices of their peers, as well as to network and interact with industry colleagues in a wide range of focus groups and workshops.

MARKET CONDITIONS AND STRATEGIC DIRECTION 

Following a brief welcome, Peter Ravn reviewed SimCorp’s business in the past year, noting that the new financial landscape had forced the industry to re­alise the need to face what has widely become known as the ‘new normal’. This, he stressed, reflects the need for organisations to be agile and adaptable to change, alongside the demand for an ever-increasing focus on the industry’s ability to mitigate risk and reduce cost, while enabling growth.

Several among the audience were nod­ding in agreement as Peter Ravn con­ceded that virtually no one has been immune to the altered financial envi­ronment. Still, he said, SimCorp in 2009 had demonstrated robust business results with profitable growth, solid cash flow and a strong balance sheet. To continue being able to grow business, Peter Ravn made clear that investing for the future is paramount, and went on to demonstrate how SimCorp con­tinually invests heavily in both product and market research, in order to know exactly what the market demands, and what the industry players expect from a solution provider like SimCorp.

The delegates were listening with rapt attention as Peter Ravn gave the floor to SimCorp’s CTO Georg Hetrodt, who went over some of the recent enhance­ments to SimCorp Dimension. Contin­ued investment in R&D, accounting for around 30% of total expenditure, was among the reasons SimCorp could con­tinue to release new and upgraded ver­sions of its software every six months, he said, and went on to demonstrate how the high-frequency release cycle was part of SimCorp’s perennial guar­antee that its clients would never be working on an outdated platform.

The audience of senior delegates from global investment management compa­nies shared an interest in learning more about the general market situation and the strategic challenges that everyone seems to be facing. It was therefore well received when SimCorp COO Torben Munch took the stage for a strategic presentation of the market and its cur­rent conditions.

LEGACIES OF THE FINANCIAL CRISIS

Focusing on the challenges facing in­vestment managers in the new competi­tive environment, the conference theme ‘sharing best practices’ was also the sub­ject of the keynote speech by Professor Ingo Walter, Director of SimCorp StrategyLab. His review of the indus­try’s situation was eagerly awaited by the audience, and listeners were not dis­appointed. Ingo Walter really grasped the nettle when he discussed the global legacies of the financial crisis and the impact it has had on the investment management sector and the behaviour of industry players. First, Ingo Walter went through the tough facts, showing a comparable analysis of financial crises’ recovery over time – demonstrating how the current cycle is taking signifi­cantly longer to change and turn up compared to the crises of 1973, 1981, 1990 and 2001.

With wit and humour, Ingo Walter an­alysed and discussed developments in the industry and financial markets backed up with extensive business intel­ligence. He debated the industry’s atti­tude towards risk, cost and growth, demonstrating how the legacy of more than US$4 trillion in investor losses had forced the industry to take a closer look at risk management, efficiency, cost and, not least, the strategic impor­tance of growth.

Ingo Walter also referred to the exten­sive research performed by SimCorp StrategyLab in 2009 and 2010, reveal­ing among other illuminating findings that 58% of the interviewed investment industry professionals believed the role and responsibility of the risk function had assumed greater prominence, and as a direct result of the current market environment, cost management had gained in strategic importance in 72% of the companies surveyed.

But the main question everyone attend­ing the conference wanted answered was: who will survive in the new financial landscape? In his reply, Professor Ingo Walter paraphrased Charles Darwin: "It is not the strongest of species that sur­vives, but rather the one most adaptable to change."

AWARDING EXCELLENCE

Following the keynote speech was a celebration of investment management organisations which have demonstrated outstanding performance, as confer­ence delegates were next privy to the announcement of the winners of this year’s SimCorp StrategyLab Excel­lence Awards. The awards have been established by SimCorp StrategyLab for the purpose of rewarding and pro­moting best practises within specifi­cally risk, cost and growth management in the global investment management industry. With a number of award can­didates sitting among the audience, the mounting excitement was palpable as news of the winners neared.

The tension was soon relieved as the re­sults of the international jury’s delibera­tions were announced, naming Edmond de Rothschild Asset Manage­ment and Nordea Savings & Asset Management the winners of the respec­tive growth and cost awards, whereas this year none of the contributions had qualified for the risk award. (Please see pp. 18–20 and 21–23 for respective arti­cles by winner representatives.)

In September 2010, close to 300 senior delegates met in Berlin, a centre of creative interaction and innovation, to share best practices in the investment management industry.

SHARING INDUSTRY SECTOR BEST PRACTICES

One of the main aims of the event was to serve as a forum for discussion about sector-specific issues. As such it offered delegates an ideal platform to share thoughts and learn more about the indi­vidual challenges and trends in the four major sectors comprising the global in­vestment management industry: asset management, investment, pension and insurance funds.

In four workshops, conducted and led by renowned academics from INSEAD and Stern School of Business at NYU, delegates could share questions and is­sues while at the same time gaining a bird’s-eye view of the industry. The par­ticipants also had the chance to discuss with and share the ideas of specialist workshop panel members who as high-level professionals had been assembled to discuss the key considerations for the specific sector and points related to risk, cost/profit and growth issues.

The asset management sector workshop was hosted by Professor Stephen Brown of Stern School of Business, NYU. The workshop debated one of the more in­teresting revelations of the financial cri­sis: the extent to which investment fidu­ciaries in dealing with hedge funds are substituting ‘trust me’ for the standard operational due diligence they would routinely expect to perform on long-only managers.

In a workshop on investment funds, Professor Martin Gruber, Stern School of Business, NYU, initiated the discus­sion by stating that the US mutual fund industry had reached an impressive size of US$12.2 trillion in assets under management, about the same size as the mutual fund industry in the rest of the world. Further, the industry was de­scribed as fairly mature in that almost 50% of American families own mutual funds. The group discussed these facts within the aspects of risk, cost/profit and growth.

The third workshop, on insurance funds, was conducted by the retired chairman of TIAA-CREF John Biggs, Stern School of Business, NYU, who cited a question raised by Professor Ingo Walter, Director of SimCorp StrategyLab: "Why did JPMorgan, Barclays and Goldman Sachs fare so much better than Citigroup, Royal Bank of Scotland and Merrill Lynch when confronted with the same finan­cial turbulence?" In an attempt to find constructive lessons the workshop’s agenda also sought to analyse the key differences in internal information flows, accountability and incentive structures, capital and risk allocation, management and corporate governance issues.

In the final sector workshop, Professor Massimo Massa of INSEAD led a dis­cussion about the pension industry and its challenges arising from the financial crisis. Massimo Massa kicked off the de­bate by introducing two key background elements that he felt the crisis had stressed and that would eventually im­pact the industry: firstly, the conflicts of interest within the financial group that manages assets; and secondly, the degree to which behavioural biases may impact the investor’s choice between ‘induced’ and ‘freely-chosen’ retirement schemes.

The four sector workshops marked the launch of SimCorp StrategyLab’s re­search programme for 2011, which will ultimately result in a number of sector-related white papers, specifically focus­ing on key considerations concerning risk, cost/profit and growth issues. Here again, the aim will be to share best prac­tices within the industry and to promote knowledge of sector-specific significance for the industry as a whole.

Keynote speaker, Professor Ingo Walter, Director of SimCorp StrategyLab.

DEVELOPING INVESTMENT MANAGEMENT SOFTWARE

Another key part of the programme was dedicated to providing the audi­ence with significant insights into the development and perspectives of the SimCorp Dimension software solu­tion, on which they base many of their essential investment activities. In this session, SimCorp Vice President of Product Management Leen Kuijken instructively demonstrated to the audi­ence what had been delivered in the past two versions of SimCorp Dimen­sion.

Obviously, what many were anxious to learn about was what to anticipate from the coming releases of the product, and to meet this request Leen Kuijken gave the audience a brief overview of ex­pected functionality across the plat­form solution. Further, she described how clients’ input in combination with market research formed the basis of SimCorp’s product development and functionality prioritisation.

Leen Kuijken then went on to explain how the development of SimCorp’s so­lution for financial institutions was built around specific drivers. Among these drivers, she cited new regulatory demands, increased risk awareness, cost reduction pressure and – very im­portantly – how to position one’s busi­ness for growth on the back of the fi­nancial crisis.

Following up on the overall roadmap for SimCorp Dimension were the ‘domain breakout streams’, which individually discussed and presented specific func­tionality within SimCorp Dimension. As SimCorp Dimension users, many delegates had been eagerly looking for­ward to the workshops, which provided an excellent opportunity for hands-on sharing of knowledge and best practices. SimCorp domain experts shared in-depth insights with the audience and en­gaged in further dialogue with clients to specifically address challenges within the various product domains. No less than 13 different domain breakout streams were offered, allowing SimCorp Dimension user delegates to pick the three of most relevance or interest to them.

NETWORKING 24/7 IN THE HEART OF BERLIN

While the working part of the event was held at the notable InterConti­nental in the heart of Berlin, SimCorp also treated its clients to a grand gala dinner for all delegates, taking place at the ‘ewerk’, one of Berlin’s most promi­nent venues for world-class cultural events. The impressive surroundings, which acted as a backdrop to a spectac­ular show by a group of highly-skilled performers, kept the spirited audience entertained for much of the night. In a casual and relaxed atmosphere, dele­gates had an enjoyable chance to mingle and socialise, exchanging ideas and ex­periences across geographical borders and industry boundaries.

NEXT YEAR’S INDUSTRY CONFERENCE COMING UP

Is the September sun slowly set over Berlin, this year’s conference drew to its inevitable close. Nearly 300 senior in­dustry delegates, who had fruitfully in­vested two days in this year’s confer­ence, now began to head home, packed with new insights and experiences from sharing and exchanging expertise and best practices among a stimulating group of industry peers and specialists. One of the delegates, a senior executive from North America, commented: "I thoroughly enjoyed the IUCM. I met SimCorp executives, and gained an un­derstanding of the firm's future direc­tion and product plans, all of which contribute important input to my com­pany's automation strategy. Networking with a global set of industry peers was also a key highlight."

Although it will be another year before the next IUCM takes place, prepara­tions have already begun, and both this year’s and new participants alike can start looking forward to gathering for another interesting and stimulating conference in 2011 – this time in Stockholm, Sweden.