FactSet: APIs are the future of portfolio manager workflow

Portfolio workflow is entering a new era of innovation following years on the sidelines. Technology has enabled portfolio managers to be better connected and informed compared with years ago. But, what workflow advances does the future hold? One way to gain insight on the trends of tomorrow is to assess the hitches of today, on the premise that those are the areas that buy-side firms and their technology vendors are focusing on.

The largest “Tier 1” buy-side firms trade a multitude of asset classes, across multiple markets around the globe. Today, the idea of a single system that meets all the needs of all portfolio managers and traders is ideal, but not realistic. The next option is to have the best systems for each specific function, which makes the challenge one of integration and optimizing user experience.

Investment managers have multiple motivations for upgrading portfolio management systems. According to a November 2017 Aite Group report, the chief reasons for doing so are operational efficiency (cited by 26% of buy-side firms), replacing manual processes with automation (26%), and improving the quality and integrity of data (21%). Other reasons include the wish to focus on investing rather than building, and a desire for an integrated front-to-back platform.

A linchpin to the PM workflow of the future comes down to three letters: API. That is, Application Programming Interface, which is a set of subroutine definitions, communication protocols, and tools for building software. In layman’s terms, a good API makes it easier to develop a computer program by providing all the building blocks, which can then be put together by the programmer.

According to FactSet’s Wolfe, “To the question of ‘How will this all work?,’ I think the answer is that some of the business walls across vendors will need to come down, and we’ll have to leverage the modern technologies that we have today regarding APIs to really deliver what the asset management community is looking for.”

“The future workflow will be built around APIs,” Kwasniewski said. “An investment manager will go out, find the best solutions they can in the marketplace, then use APIs to connect into those best-of-breed datasets or analytical engines.”

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