Why asset managers should have their heads in the cloud
With all the vendor hype and hyperbole around cloud computing, institutional asset managers could be forgiven for feeling fatigued. However, there is strong evidence to suggest that many firms using legacy on-premises solutions face internal pressure to migrate to a hosted solution in whole or in part.
Aite’s recent Multi-Asset Buy-Side Risk report states that “cloud-native solutions are becoming an important consideration for buy-side firms as they shift away from on-premises implementation. Clients expect technology platforms to be able to scale with businesses without performance issues.”
Beyond internal pressures, there are myriad reasons why users of legacy systems might consider moving to the cloud. For many years, on-premises systems have suffered from software and technology that hasn’t kept up to date, while also incurring higher costs to support it. Cloud-based systems can release software updates nearly continuously, offering clients immediate benefits while on-premises solutions are often updated annually or quarterly at most. Further, clients can take advantage of economies of scale with cloud-based systems which may not be possible with deployed solutions. Cloud-native tools are also particularly well suited (and often only available in the cloud) for solving big data problems which are becoming increasingly prevalent in finance.
Clients can take advantage of the resources needed on demand instead of purchasing hardware which is adequate most of the time, but strained when there’s higher demand, such as end of quarter or end of year reporting cycles. Likewise, hardware is continuously refreshed in the cloud allowing users to take advantage of newer, more performant, and more energy efficient processors as it’s deployed and without the capital outlay which would otherwise be required. The breadth of technology available on demand, such as GPUs, means that if a vendor optimizes a feature through the use of specific hardware, it can be provisioned in a matter of minutes.
Cloud-based systems have the capacity to outperform hosted solutions for all of these reasons, and ultimately, speed is key. Tasks that used to take hours, can take minutes, and often seconds. Computationally expensive calculations such as Risk (VaR) with full repricing are particularly well suited for the scalability of cloud infrastructure.
Historical results can be stored and accessed instantly, potentially offering additional insights not previously available and obviating the need to develop internal infrastructure for storage of results in-house. Instantly available results, available as needed via an API and other tools, are the future.
Cloud migration has been and continues to be a necessary part of the entire financial industry’s technological evolution – and asset managers are clearly no exception.
Moody’s Analytics recently enhanced its cloud based PFaroe Portfolio Management solution to include market risk capabilities to allow portfolio managers to customize their risk analyses while providing an interactive tool to probe and analyze results. See here for more information.