A survey carried out by NET2S, a consultancy specialising in capital markets technology, highlights a significant shortfall in adequate risk management in the portfolio management systems (PMS) vendor space. 56% of vendors fail to provide any form of risk management at all. Of those who do, only one third offer enough analytics and stress testing capabilities to be considered ‘adequate’ by NET2S.
The survey of January 2007 compared the offerings of 29 different vendors against ten strict criteria including decision support and analytics, risk management, client reporting and compliance. These results were then compared with the feedback and experience of their 45+ institutional global clients and cross-referenced with each vendor’s asset class coverage, to give a thorough and detailed analysis of today’s vendor market.
The survey also found that the PMS market is highly fragmented, with no single vendor dominating. In the run-up to MiFID there is a lack of compliance integration amongst the vendor offerings, with only three of the 29 reviewed PMSs offering compliance modules. The three core functions of PMSs (decision support, trade and position management and performance management) are well supported by the market, however advanced analytics and portfolio modelling tools are only available in 11% of cases.
“This is likely the first time that such a comprehensive survey of the PMS market has been carried out, and some of the results are surprising. Most surprising of all is the noticeable lack of adequate risk management, both in terms of post-trade analytics and portfolio stress testing,” remarks Frederic Ponzo, managing director, NET2S. “We can also see that, with a total of 29 vendors, the PMS space is incredibly fragmented, with perhaps more vendors than in any other field. There is a definite lack of maturity in the PMS space on both the asset manager and vendor sides, and it is our view that as markets become increasingly global, the PMS market will consolidate very quickly,” he concludes.