Benchmarking Investment Accounting Systems in APAC

The continuous growth of assets shows few signs of slowing despite the volatility introduced by the COVID-19 pandemic and recent geopolitical instabilities / military conflicts affecting global markets. This is underpinned by several key drivers: AI integration (which is expected to drive 3.5% of global GDP by 2030), most regulatory facilitators throughout APAC considering moving to T+1 securities settlement cycles over the next 3 years, rising cost pressures pushing asset owners & managers to find greater operational efficiencies, and growth in alternative assets (accounting for ~19% of global AUM in 2023) for portfolio diversification. 

This rapid growth of assets corresponds to proportional scaling demands on middle- and back-office (MO/BO) functions, a critical aspect of which is investment accounting systems and how they can efficiently support the financial entities encountering these key drivers to scale effectively. 

Sia developed a standard assessment framework, leveraging previous experience with Investment Accounting (IA) vendors. The framework identifies five key elements to enable the success of IA systems: Servicing, Market, Accounting, and Technology; collectively known as “SMART”.  

Sia conducted 2 rounds of surveys for participating IA vendors.  

• The first round consisted of 45 short-answer questions across the SMART framework retrieved from deep-dive discussions with the market (insurance companies, asset managers).
• The second round sought further clarification to adequately compare IA vendors, along with additional questions derived from consultation with IA system users (asset owners and managers).  

All responses were anonymised between parties. Results were consolidated and reviewed after each round, with the key best practices/trends outlined in this report. 

Servicing: Enhancing the customer experience from implementation to ongoing support.   

The scope of IA systems is rapidly expanding beyond traditional MO/BO support, as vendors strive to broaden managed services to complement the key drivers of APAC markets. Users are outsourcing these functions to vendors primarily to reduce costs and enhance data accuracy:  

Corporate Actions – while most vendors incorporate some elements of corporate actions as part of their system or as part of another solution, best practice dictates complete transparency, including complex events such as proxy voting, mergers, and divestitures. 

Reconciliation – software solutions that provide automated trade reconciliations with over 95% Straight-Through Processing (STP), supported by a dedicated reconciliation team to handle exceptions. 

Asset Valuation – modules can calculate illiquid asset NAVs and deliver fund administration services using third-party pricing feeds (e.g. Bloomberg). 

Additionally, augmented customer service is rising, with AI chatbots filtering information for simple queries while prioritising human resources for complex cases. Vendors are achieving turnaround times for critical support cases in under one hour, with globally distributed teams facilitating year-round 24/7 user support.   

Market: How vendors establish and differentiate themselves both globally and regionally.   

Most vendors surveyed highlighted strengths in brand, client support, data control, and ongoing R&D, though capabilities varied across these areas. Critical points of differentiation between vendors were identified in vertical specialisation and the utilisation of new technologies, such as the data scalability of cloud nativity and the efficiencies of AI data analysis/personalisation. 

Accounting: Core features that add value for customers 

Due to the diversity of local reporting standards across APAC, multinational users seek IA systems that provide multiple entries accounting for comprehensive financial analysis / reporting. The bleeding edge of which is to provide multiple views for accounting standards, lot inventory & security book value / costs with automated look-through features that span all fund levels for transparency. 

Driven by regulatory requirements and IFRS9 adoption, users also seek additional core accounting features to enable greater MO efficiencies. IA vendors enhance their value proposition by including hedge accounting modules with flexible testing tools to evaluate effectiveness, multiple approaches to impairment / allowances for tailored financial assessment, while also exploring local restitutions calculations for dividends & coupons. 

Rates: Pricing Structures and lock-in periods 

As the financial industry moves through significant transformation, IA systems are incorporating more subscription-based models, introducing greater contract flexibility to reduce perceived risk from users and ultimately build strong credibility while R&D developments modernise their existing systems. Contract periods offer flexible termination options, allowing customers to exit agreements with a 30-day notice whilst all-inclusive fee structures simplify the billing process, ensuring customers have a clear understanding of financial commitments without hidden charges. 

Technology: Leveraging advances to enhance efficiency & customer experience 

Technological innovation is the driving force behind transformative advances in investment accounting systems. Cloud native systems have redefined investment accounting by their huge capacity for data, enabling data immutability in accounting records and ultimately resulted in “lock/unlock accounting” possibilities: the ability for users to independently reopen, edit and reclose data from historic periods. NoSQL databases are allowing systems to move away from traditional by-batch data processing to real-time results for more accurate and timely decision-making. Finally, eliminating discrepancies between IBOR & ABOR by both books being fed from a single “golden source” of data facilitates streamlined operations, operational risk reductions and data accuracy for providers. 

Sia supports asset owners & managers across 5 key areas to optimize middle- and back-office operations:  

1. Investment Accounting System Benchmarking & Selection, evaluating IA systems against client requirements to recommend the best-fit service provider. 
2. Middle & Back Office Outsourcing & Automation, streamlining costs by outsourcing operations and automating repetitive tasks
3. Investment Accounting Vendor Rationalization, assessing current vendor performance and proposing cost-efficient MO / BO models 
4. IT Architecture and Rationalization, designing strategic system upgrades and optimizing infrastructure
5. Onboarding Support, guiding clients through service provider transitions, platform implementations, and new entity or account setups. Together, these capabilities ensure operational efficiency, cost savings, and seamless scalability.