Aberdeen Asset Management: Attaining a quality technology platform
To call Aberdeen Asset Management a big company is a massive understatement. It is a mammoth organisation. Since 2005, it has acquired the asset management divisions of Deutsche Bank, Credit Suisse and the Royal Bank of Scotland (RBS). It currently has 31 offices around the globe and manages approximately $164.7 billion in investor assets.
Following these major acquisitions, the group found itself in unchartered territories by having to rapidly adapt to new trading strategies. Modifying the technology and operations to keep on top of all of the logistics, be it trading or risk management, is no easy feat as Ken Fry, chief operating officer at Aberdeen Asset Management, will testify.
Consolidating all the technology is essential. “We are always in the process of consolidating. It is an unusually clean operation for a company our size and given our background in acquisitions. We work very hard to come up with a single model and it is the only way we can drive efficiency,” Fry comments.
The Deutsche Bank Asset Management acquisition in 2005 was the toughest – it tripled the size of the group’s assets overnight. Aberdeen has a clear acquisitions strategy – companies it takes over are moved onto its technology platform as part of the transition. With the Deutsche Bank takeover, the firm had to add fixed income capability, a new front office system, additional time zones and write a client reporting system. “It was a major upgrade to our platform to support the acquisition,” Fry acknowledges. He adds the challenge was made harder due to the time-scale – the takeover was effectively a three year project undertaken in 18 months.
However, such was the complexity of the Deutsche Bank Asset Management takeover, Aberdeen’s acquisition of Credit Suisse’s asset management division in 2008 was much more straightforward – all the technology was in place – it was just a matter of shifting the staff onto it.
With the purchase of RBS’s asset management business in early 2010, the process was certainly not a breeze. “RBS took us into new asset classes that we didn’t have much experience with previously. These included funds of hedge funds, funds of private equity funds and funds of property funds. We have been doing a lot of work on how we can support these new asset classes. If you look at our traditional business, our platforms are highly industrialised. If you look at the funds of funds business, it’s smaller in terms of assets under management but it consists of low volume, high complexity transactions so it is a different style of business. It was a lot of work to support these new asset classes,” says Fry.
These major investment banks, according to Fry, had technology that didn’t make sense financially. Such was the scale of the banks’ in-house technology, it would also have been a huge task to incorporate it into Aberdeen’s existing infrastructure. “Deutsche Bank Asset Management and Credit Suisse Asset Management were operating platforms that were extremely expensive. We took out huge overheads moving them onto our platforms. We didn’t take ownership of their technology at any time. Ultimately we slashed operational costs. You need to be ruthless in the way you consolidate platforms otherwise you will be buried under a wave of platforms and overheads. Fortunately, we avoided that,” adds Fry.
Acclimatising technology to different asset classes is not the hardest part of Fry's job although he says it does require time and effort to come up with the right model to cater for all trades. His biggest challenge is moving staff onto Aberdeen’s platform following an acquisition – this is something that is done immediately. People often want to stick with the technology that they are familiar with – however, Aberdeen staunchly believes trading systems must be universal for all of their strategies to run smoothly. In Aberdeen’s case, CharlesRiver’s technology platform has been deployed for all its trading operations.
Fry compares his job of moving staff onto the CharlesRiver platform to that of a mobile phone salesman offering a reluctant customer an upgrade to a better model. “People just like what they are used to,” he adds.
However, once on the platform staff receive training and have full access to an in-house IT help desk – this undoubtedly helps the move from one system to another. “We outsource a lot but we don’t outsource any desktop support. We have employees on all our major sites supporting our people. If the problem cannot be solved on the phone, our IT staff will fix it at the person’s desk. It’s a quality service – if you ask people who we have acquired over the years about IT delivery services at their previous companies, they often haven’t got a good thing to say. These support services are not the most expensive thing we do but we get the biggest benefit out of it,” says Fry.
Despite being one of the first asset managers to start outsourcing investment operations in the late 1990s, Aberdeen is reluctant to outsource technology. Fry highlights, however, that a lot of Aberdeen’s operations, particularly in its back office, are outsourced. He believes doing that with technology would be problematic.
“Outsourcing is something that needs to be strongly managed to make it work. With technology, that would be difficult. Outsourcing is very difficult and it is one area where accountants should not make decisions. It may look very attractive on paper but it can be a challenge to manage. Anyone who thinks they are making life easier by outsourcing doesn’t understand what they are doing,” Fry adds.
The group is an incredibly lean and cost-conscious organisation – nevertheless, Fry acknowledges quality technology is something Aberdeen is “not frightened to invest in because it pays dividends at the end of the day.”
Ken Fry is chief operating officer and head of the operations division at Aberdeen Asset Management. He joined the firm in 1989 with the acquisition of Frederick’s Place Group where he was responsible for investment technology. Fry graduated from the University of Essex with a BA in Computer Science.