Investment Operations

Buy-Side Fund and Investment Accounting: Overlooked but Not Forgotten

A new Aite Group report finds that oversight and risk controls over outsourced arrangements are the main theme for the 2020s for firms with such arrangements.

Investment and fund accounting are often overlooked functions that span the middle and back operations of global buy-side firms and, as such, are commonly outsourced, to some degree, to third-party providers. However, outsourcing does not remove the liability of firms, which means technology or additional services are required in-house, and investment firms will continue to be directly impacted by technology innovation that can offer efficiency gains or improvements to straight-through processing for investment accounting. The latest Aite Group report, Buy-Side Fund and Investment Accounting: Overlooked but Not Forgotten, explores investment and fund accounting operating models and the changing needs around technology and outsourced providers.

“A greater regulatory spotlight is on buy-side firms’ outsourcing arrangements and oversight capabilities,” states Paul Sinthunont, senior analyst at Aite Group. “As a consequence, firms will need some formal process, monitoring tools, or even contingent or full shadow accounting capabilities in-house,” he explains.

This report—the first in a two-part series that highlights the most salient trends within the investment and fund accounting operations at buy-side institutions—highlights and examines the various operating models, organizational changes, the role of technology, and most common challenges faced by end users, and provides a brief overview of the third-party vendor space. It is based on Aite Group interviews with 32 global buy-side firms and fund administrators conducted between August 2019 and January 2020.