Investment accounting is moving up the data management agenda as regulatory pressure and investor demands collide with the limits of legacy systems, and as new technology makes real-time, enterprise-wide accuracy achievable at scale.
Getting that right, however, requires planning and the careful selection of expert partners, argues Lior Yogev, chief executive at FundGuard.
“When it’s mismanaged via inefficiencies or inaccuracies, it disrupts the whole investment operations lifecycle,” Yogev told Data Management Insight. “This reaches from the investment and fund accounting teams, all the way to performance teams and portfolio managers. Delays, errors, or batch-only data can erode trust and slow decision-making throughout the enterprise.”
Multiple Workflows
Investment accounting covers a broad slate of workflows including the precise tracking, valuation and compliance management of portfolio data, such as NAV calculations and investment accounting data. The calculations can be complex and as trading volumes rise and as the types of assets traded and markets engaged with multiplies, the work required has snowballed.
“The investment operations landscape is being reshaped by two major forces: market innovation in products and macro pressures on resilience and compliance,” said Yogev.
“The blurring lines between public and private markets, and the growth of custom SMAs and direct investing are pushing firms to manage portfolios at a far more granular level, accommodating personalisation, tax optimisation, and evolving investor expectations. Traditional accounting systems, built for particular asset classes, jurisdictions and/or investment products will struggle to handle this complexity. Future-ready platforms will need to deliver real-time, streaming accounting data across asset classes, products and business views to support these innovations at scale.
“At the same time, economic uncertainty, heightened regulatory scrutiny, and market volatility are making operational resilience a board-level priority. Cloud-native architectures enable firms to dynamically scale capacity, maintain continuous operations, and adapt quickly to new regulatory requirements, all while reducing risk and cost.
“Taken together, these trends point to an industry where data-native, cloud-native investment accounting platforms become essential infrastructure: unifying books of record, delivering a single source of truth, and enabling firms to innovate while staying resilient in an unpredictable environment.”
Modern Template
A modern investment accounting platform is built on a cloud-native architecture, stores data in real-time across the enterprise and is centred on a single source of truth, said Yogev. As well, it comprises support for multi?book accounting (ABOR and IBOR, for instance) in a unified system and continuous versioning – with real-time controls, automated recon tasks, audit trails embedded within the system and digital workflows. AI and machine learning integration for “automation, accuracy and proactive control” would also be a must.
The clamour for faster and more efficient accounting capabilities is apparent. For some companies, however, systemic infrastructure challenges are providing a barrier to meeting the new demands placed on compliance.
They may be bound by legacy systems that still rely on manual processes, spreadsheets, siloed applications or decades-old platforms that lack automation, flexibility, scalability or unified integration. Such systems may not be able to accommodate the huge volumes of data that are flowing onto them.
Legacy Systems
The result is fragmented data, inefficiencies, reconciliation headaches, operational risk and slower response to evolving regulatory or client demands. Those organisations are left with a number of impediments, said Yogev:
- Technical debt: Legacy systems are deeply intertwined with manual processes and brittle integrations, making migration risky and time-consuming.
- Operational inertia: Many firms try to replicate old workflows in new environments, which only perpetuates inefficiencies.
- Change resistance: Teams are hesitant to abandon processes they’ve relied on for years, leading to “cosmetic” digitisation at the front office while the middle and back offices remain stuck in outdated workflows.
FundGuard – whose artificial-intelligence powered solutions are designed to automate and enhance accuracy, handle reconciliation, exceptions, and enables pre-emptive controls, shifting accounting from reactive to proactive – argues that firms can take a number of steps to strengthen their operations. Automation, error-detection, reconciliations and exception handling through AI tops its list of measures that companies could take.
Careful Roadmap
But it also stresses that a careful roadmap must be followed. Modern accounting platforms, like any innovation, are bound to require sensitive considering before implementation treatment so as not to create stress within corporate cultures because it will require a mindset shift with the enterprise. “Teams should openly assess whether their appetite is for a complete ground-up rebuild or for a more iterative, phased approach over time,” said Yogev.
Another stage in that roadmap would be operational design; rethinking workflows across back-, middle- and front-office, enabled by new technology, while preventing “legacy thinking from creating blinders for what’s possible with a modern tech stack”.
The final step would be to ensure stakeholder alignment by establishing “governance and engagement models across client, provider, and partner teams”.
“Technology alone is not enough to achieve scalable and resilient transformation. Firms must rethink the operating model,” said Yogev.
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