Across all industries, digital transformation is offering unprecedented opportunities for innovation. The workplace is rapidly evolving, and businesses have to be prepared to adapt. In today’s world, digital transformation technologies are used to operate every element of a business, from operations through to proposition development and management oversight and control. The transformation can be seen as a power shift from firms to investors, who expect more from their portfolio managers than ever before. Data is becoming increasingly important to be able to obtain key insights, to manage business processes and to highlight exceptions and errors. Additional oversight to ensure the regulated sector in the UK remains reputationally robust is also important.

Digitisation is revolutionising the alternatives sector

The sector is experiencing transformation like any other, not least in operational processing and forecasting functions which are benefitting from the current revolution in technology. We are currently witnessing seismic shifts in how transactions are managed, who records this information and what that information is used for to benefit the firm and investor going forward. On innovation, the FCA talks positively but wants to see technology used as a means to improve investor engagement. For instance, the FCA noted that fund prospectuses and client reporting tend to be rather underwhelming and asks whether technology could help redress some of these deficiencies. It also poses the question as to whether technology could improve investor participation at unitholder meetings, providing increased levels of oversight.

The FCA’s current discussion paper makes it clear that the FCA expects fund managers, many of whom are still reliant on legacy technology to some degree, to modernise their internal systems and operations. For those that are required to test these firms’ propriety and compliance models, such as the FCA and technology partners, digitisation provides a wealth of data that has simply not been available before. Information that may have previously been difficult to access is now available for interrogation on a much bigger and more useful scale. The regulator is also focusing on this key area to help them supervise firms more effectively. Firms which leverage best-in-class tools will be in a strong position to navigate any changes as and when they are implemented.

Greater connectivity

Digitalisation is already bringing far greater and faster connectivity. The use of machine learning (ML), data analytics and process automation are bringing about the removal of labour-intensive administrative tasks with positive cost-saving results. The processes themselves are also more available in accessible form to be scrutinised and monitored by the regulators or auditors. The increase in volume of data provides far larger samples for interrogation resulting in more accurate feedback and higher quality information which can be used to improve forecasting and to build a more accurate and useful picture of the real state of play.

New technology, often in the form of ML, is rapidly replacing legacy systems. Once achieved, the new processes will create a deeper understanding of a firm’s data patterns. It also offers more opportunity to monitor fraud controls and reporting processes by giving minute detail on who, where and how data is being inputted and accessed.