One in four investment management firms are running their business on outdated technology systems, according to research from SimCorp StrategyLab.
In a report on legacy systems, SimCorp StrategyLab also found buy-side firms were spending large amounts of money on maintaining existing systems instead of seeking more cost-effective alternatives.
The survey of 500 buy-side firms found that slightly more than 25% of respondents are running core business processes on outdated legacy systems.
With budgets squeezed, many firms are putting off major upgrades to their systems, but SimCorp said the high maintenance costs of legacy systems mean this is a false economy.
On average, surveyed firms were using around 20% of their IT budget to invest in new technology, while 80% was spent on maintaining existing systems.
Aside from cutting maintenance costs, making broad updates to technology systems can help asset managers to better identify risks in their portfolio and give management greater oversight of a firm’s exposure.
Ingo Walter, president of SimCorp StrategyLab and professor at the Stern School of Business, said: “[Following the financial crisis] there has been a lack of insight into the role that technology systems played in accounting for why executives were not able to access the most basic information on the state of their businesses in order to take corrective action.
“Neither has there been an analysis as to why some firms were better able than others to understand their counterparty exposure and mitigate the losses resulting from the collapse of Lehman Brothers and Bear Sterns.”
He suggests that firms with more up to date technology were better able to track and assess their exposure to risk, highlighting the importance of firms ensuring the have robust technology in place.