European asset management giant Amundi has struck a partnership with Luxembourg-based custodian CACEIS for a new front-to-back office solution that will aid the rollout of its outsourced trading service.
Through the partnership, Amundi will integrate its front-office software ALTO with CACEIS’ middle- and back-office services to provide a broad outsourcing solutions covering all major asset classes.
Speaking to The TRADE, Joseph El Gharib, director of Amundi Services, explained the asset manager has only just begun opening its flagship portfolio management system to external clients. “We felt for clients that were willing to outsource a full stack of services, they can turn to a one-stop shop which we can now offer all together [with CACEIS],” said Gharib.
After completing the integration of the ALTO system with CACEIS, El Gharib added that other asset manager clients would be able to use their platform for their trading and execution, with the data flowing to the CACEIS middle-office through the same technology, thereby eliminating any potential disconnect.
The partnership will also further strengthen Amundi’s outsourced trading service for asset managers and institutional investors. According to El Gharib, the firm has one client already using them as their outsourced trading desk, with ALTO as the front-office software and CACEIS providing the middle and back-office.
Industry headwinds and changes in market structure due to increased regulation have seen the buy-side evaluate the tangible benefits of outsourced trading. Some benefits of outsourced execution have been highlighted due to the shift from active to passive management, increased regulations and squeezed margins for asset managers facing pressure over their fees and costs.
The combination of global custodian State Street and Charles River Development in 2018 struck a chord with the industry as to how trading platforms and middle- and back-office services are becoming aligned. Since the acquisition, State Street is planning to roll out its own outsourced trading service, with Charles River’s Investment Management System as the trading technology.
Meanwhile SimCorp’s flagship front-to-back system Dimension is also being increasingly adopted by European buy-side firms, and other brokers including Virtu, AllianceBernstein, as well as custodian Northern Trust, just to name a few have launched an outsourced trading service. However, the front-to-back partnership with CACEIS, as well as the outsourced trading service, is the first to be offered by a major buy-side firm.
“The expectation is to have this new [outsourced] model emerge as a viable solution. From the perspective of a smaller asset manager, they would want to concentrate on their core activity which is managing funds, and the rest to be commoditised somewhere else. We can offer that industrial-scale operation that can support the front- and back-end,” he added.