Article How to select the right PMS?

The PMS is a key driver of operational efficiency, addressing the structural challenges faced by the entire buy side community. It’s designed to meet regulatory requirements, simplifying all operational processes for asset managers.

Also, the PMS helps asset management companies reduce their TCO by automating recurring tasks and processes, such as the entire workflow from order management, trade execution to client reporting.

The PMS, also known as an Order Management System (OMS) or Investment Management System (IMS), the PMS “is the central technological tool for an asset management or investment firm. By covering the entire value chain of an asset management and bringing together professionals across all functions, including portfolio managers, operations teams, risk management, compliance, and data management, the PMS serves as the backbone of asset management,” explains Dinushe Caldera.

Connecting the PMS to the ecosystem of banks, custodians, and data providers reduces operational risks and enhances productivity. This centralized tool streamlines coordination between different teams by providing them with consistent information, thereby enhancing operational efficiency.

“If the PMS is not connected to the custodian and a conditional corporate action arises, the portfolio manager passes the information to an operations team member, who then manually enters it into the bank’s interface to ensure the choice is applied. However, since this process relies on human input, there are instances where the asset management firm’s response is not sent to the custodian. As a result, the custodian enforces a default option that does not necessarily align with the client’s choice. Thus, the PMS is crucial in minimizing errors,” explains the expert.

To ensure seamless integration with the firm's model, expertise, and resources, several criteria must be considered when selecting the right PMS. The type of PMS provider is important. It affects how standardized or customizable the technology is, whether it includes human support or outsourced services, and how well it can adapt to the client's needs over time.

PMS providers can be categorized into two main types. “The first is the software provider, who typically creates a specific category of technological solution with functionalities designed to meet the needs of a diverse range of clients,” explains Dinushe Caldera. «In this model, the provider is leaving the clients responsible for managing the integration into their existing ecosystems”.

“In contrast”, he continues, “the second type consists of asset managers who develop a technological solution for other asset managers while also using it themselves. This is the case of Amundi Technology, which develops, sells, and uses its own PMS software. This approach ensures a deep understanding of client needs and regulatory obligations, as the provider follows a logic of continuous improvement by testing and refining the solution internally”. For example, Amundi Technology offers integrated business services in addition to the technology, such as managed data services, and built-in connectors to leading data providers like Bloomberg and Reuters, and also to top ESG data providers.

Clients should evaluate the PMS's level of standardization and customization to ensure it meets their specific needs. “There are standardized solutions that provide limited customization options, requiring the client to adapt their processes to fit the tool,” points out the expert. “Conversely, other solutions are designed with flexible features that allow them to sustainably adapt to the specific needs of each client.”

Assessing the provider’s long-term viability and adaptability to future regulatory changes is crucial., the included service offerings, and the adaptability of the system to future regulatory changes and client needs. “When making a long-term investment in technology, it is essential to ensure that the software provider’s company is stable and not at risk of being sold within five years”, warns Dinushe Caldera. “The PMS must meet the client’s current needs but also be capable of adapting to future requirements. Similarly, clients should ensure that the provider’s team, with whom they will collaborate over the long term, understands their needs and can adjust accordingly”.

In conclusion, the PMS is an essential tool for asset management firms, providing operational efficiency, cost reduction, and regulatory compliance. As the industry evolves, choosing a PMS that can adapt to future needs and integrate advanced technologies, such as artificial intelligence, will be essential. Asset managers should carefully evaluate their options to ensure long-term success.

“For instance, five to ten years ago, ESG asset allocation represented only a small portion of an asset manager’s portfolio. If a client selected a PMS five years ago that did not account for regulatory obligations related to ESG, they are now forced to either supplement their PMS with another provider or replace it entirely—both of which incur operational costs”, observes the Head of APAC Business Development at Amundi Technology.

To address the needs of various types of asset managers, Amundi Technology provides two types of PMS solutions. The first, ALTO Investment, is designed for asset managers and asset owners, including insurance companies and pension funds. “Amundi Asset Management uses this turnkey solution, which encompasses the management of mutual fund assets and covers the entire value chain. As both the developer and user of its own software, Amundi Technology ensures that the solution is modular and customizable. This allows it to adapt to the specific needs of asset managers through a flexible, collaborative approach. We also integrate outsourced services, such as trading”, notes Dinushe Caldera.

“Our modular approach allows asset managers to choose the components that best fit their existing PMS infrastructure. If certain elements of their system are functioning well, we encourage them to retain those components, thereby avoiding the risks associated with a full system replacement. Our goal is to address areas where challenges exist by implementing our PMS and services to deliver real value to investment managers", adds Dinushe Caldera.

Originally as separate and non-integrated tools for each function - what we use to refer to as best of breed solutions-, the PMS has evolved into a fully integrated and centralized system, which can incorporate seamlessly specialized engines. This transformation allows all teams to use the same data across functions while benefiting from the best and most ad hoc business processing.