Much has been made of large asset managers outsourcing their fund operations over the past few years. Legal & General Investment Management’s decision to entrust its operational infrastructure to State Street was a prime case in point. But scratch beneath the surface of the headlines, and you will find a growing number of asset managers gradually taking operations back in-house.
The last two decades saw operational outsourcing become almost a default approach. Amid mounting regulatory pressure and the constant need to make every penny count, many firms opted to shift non-core activities to third-party providers. On paper, this seemed logical. In practice, however, it has led to reduced oversight, limited visibility, and a troubling inability to react quickly to operational change.
How times have changed. Today’s asset managers operate in a globally fragmented investment world that is more complex than ever. The rapid rise in alternatives, from private credit to real assets, has expanded the industry’s reach – but also introduced new layers of operational unwieldiness. Unfortunately, these asset classes are typically less transparent, involve many more intermediaries, and demand a much higher level of cross-party coordination, from custodians and fund administrators to transfer agents and distributors.
The problem is many of the interactions between these counterparties are still heavily reliant on email, spreadsheets, and, of course, people. This outdated way of working simply cannot keep pace with the volume and complexity of modern fund operations.
It creates communication bottlenecks, increases operational risk, and stretches already lean operational teams within mid-sized or boutique funds. While certain custodians and other third-party providers have made strides in modernisation, progress is often slow due to entrenched legacy systems that are costly, rigid, and difficult to integrate with. As a consequence, efficiency gains have lagged behind industry needs. This growing frustration is leading asset managers to reconsider the outsourcing model altogether. In some cases, they’re concluding that to truly modernise and scale, they need to bring operations back in-house so they can implement nimble tech solutions on their own terms.
Many fund managers are now recognising this and moving in a different direction. According to a survey of attendees carried out at InvestOps Connect Europe in London last week, 75% of buy-side participants are either starting or midway through a technology transformation project. It’s now all about building operational resilience, as opposed to slashing costs. Many of these boutique asset managers, for instance, are bringing fund operations back in-house after years of outsourcing to global providers. They are doing this primarily to regain control, improve service quality, and scale efficiently by deploying technology.
The reason for this is simple. Unlike two decades ago, when outsourcing was the norm, technology is now sophisticated enough to replace tasks previously sent to third parties. Self-service platforms, API-based data access, and collaboration platforms tools offer an alternative to email backlogs and manual intervention. As a result, one particular global custodian is said to be reducing a major asset manager’s email volumes by up to 80%.
This isn’t just about efficiency, it’s about empowering operations teams with the ability to reclaim control of their middle and back-office decision making.
As asset managers look to the future, they face a stark choice. Either continue layering complexity through traditional outsourcing, or embrace modern, scalable technologies that offer greater control.
The fund industry may not be turning its back on outsourcing altogether, but the winds are clearly shifting. Forward-thinking asset managers are no longer asking whether tech can transform their operations. Instead, they’re asking how fast they can deploy it.
By bringing core processes back in-house and empowering teams with the right tools, firms are finally starting to regain control and build future-ready operational models. In a market where agility, transparency and client service are at a premium, those who embrace this change early will be the ones setting the pace for the next era of fund operations.
By Diederik Geeraerts, CEO of London-based post-trade platform Taskize
