The lines between portfolio management systems (PMS) and order management systems (OMS) are blurring partly to the rise of software as a service (SaaS) and cloud-native solutions, according to a new study by Greenwich Associates – Cloud Solutions Drive Order and Portfolio Management Innovation.
The technology provides easier access to features and functionality across solution categories and moves the needle closer to the buyside vision of end-to-end integrated order, portfolio and execution management systems or POEMS becoming more of a reality.
The study found that the OMS is still the biggest component of buyside equity trading desk spend at 27% but 43% of third-party OMS solutions are now delivered remotely via SaaS or cloud. Only 12% use an execution management system. (EMS).
Convergence has been a long running theme across the buyside industry but especially with hedge funds which typically manage less money – $1 bn to $ 5bn – than their traditional peers. They operate many more funds and have a greater compliance burden.
To date, 55% of asset managers still choose a separate OMS and EMS tailored to specific investment needs, which highlights an opportunity for single platforms that can improve the workflow to challenge this configuration.
“Buyside firms, particularly hedge funds, are increasingly moving to a converged solution for portfolio management purposes, alongside a well-orchestrated OMS and basic execution management system (EMS) functionality,” says David Easthope, Senior Analyst for Greenwich Associates Market Structure & Technology, and author of the report.
The report notes that only the larger or more specialised buyside firms continue to build their trading platforms in-house but many are beginning to look at vendor solutions, as they are less expensive and can outperform internal builds on breadth of functionality.
The report revealed that 85% of all funds are using a third-party OMS mainly due to the big push by PMS and OMS providers in the early 2000s. The argument was that building internal technology systems was seen as onerous and costly when compared to buying and customising vendor technology.
“For now, small to medium-size hedge funds are well placed to take advantage of this newer technology to improve their workflows and simplify their overall technology infrastructure,” says Easthope. “However, since convergence has been the dream of the buyside for more than two decades, we expect the trend that will pick up steam across all types of firms in the next few years.”
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