Advent has published notes on its experiences with the investment management industry in South Africa. Marius Esterhuysen, Senior Regional Manager, Sub-Saharan Africa, Advent Software observes: “Many of our South African clients have a strong drive to use locally entrenched and regionally committed vendors: the nuances of the South African market are a prerequisite to any firm considering doing business here.”
Transparency is a key driver in the South African investment management industry. Advent reports that as international regulations go into effect the onus is on the investment manager to offer more value to their clients in terms of reporting. “More specifically, South Africa’s Regulation 28 is creating a requirement for firms to be able to not only manage their portfolios more accurately but track exposure down to the individual investment level. Going forward, risk metrics, accurate and timely performance, and complex and segmented reporting are going to be key areas of focus” the firm says.
“International vendors need to be able to cater for the way that South Africa deals with instruments, tax, and valuation. Interest withholding tax, daily cash settled futures, margin requirements, and regulation are unique to South Africa and firms here are less open to workarounds,” said Joel Burnette, Consultant, Advent Software.
Advent also found that while it may be counterintuitive to think of South Africa as a trend setter in cloud solutions for investment management, it is. “With a relatively modern and reliable internet, 3G, and a growing 4G LTE network, connectivity has never been better in South Africa” Advent reports. “Modern data centres are growing in both capacity and demand as firms seek to offload the IT overhead and focus on revenue generating activities. Local investment management solution providers either offer a full cloud solution or at least the option to deploy to cloud for their clients. The standard has already been set that cloud deployment is an option if not the solution. Firms that aim to streamline the back office processes enabling exception-based issue resolution on a fully outsourced technology platform will be the front-runners.”
Esterhuysen says: “Cloud, specifically private cloud is preferred in a lot of firms in the South African investment management industry currently, as clients do not want to carry the IT burden and the associated costs of expertise. Providers unable to offer Software as a Service (SaaS) will lose out as the trend takes hold in 2015.”
In terms of privacy and protection of data, the onus is on the investment manager to ensure that client data is protected, private and encrypted. Advent says outsourced technology providers must ensure that their systems meet international standards for data protection while in storage and in transit. “Looking ahead, the growth of private cloud solutions is going to shift more of the burden of data protection to the technology provider, but the investment manager must be savvy enough to select providers that are adhering to international standards.”
Esterhuysen says: “The African continent lacks on-site data storage from major cloud providers but as the appetite for outsourced technology in Africa grows, the major providers are no more than two years away from understanding greater Africa as a real and lucrative market.”
Advent predicts that consumer technology trends will drive incremental shifts for investment managers. “Major paradigm shifts in consumer technology have changed our personal lives and have already made significant disruptions in some industries. And while the financial services space takes a more conservative approach to adopting emerging technologies for obvious reasons, tech-driven disruptions are emerging in retail financial services with trends like peer to peer lending and the emergence of robo-advisors. All this is having an effect on the investment management industry with firms looking for more collaborative social solutions in order to share information.”
“We are finding that it is the clients’ demands for accurate information that are driving the changes; online access is now a basic requirement in order to deliver rich graphical and data-based information,” says Esterhuysen.