Investment Management firms take control of IT costs

London, 28 September 2005 - Investit, the leading fund management consultancy, today announced the results of its fourth IT Value Survey. Investit surveyed 21 investment management firms with total funds in excess of £2.1 trillion under management. The survey examines IT spending levels and trends and assesses business levels of satisfaction with IT systems and services and value gained. The IT budgets of participants ranged from £3m to £60m, representing a total IT spend of £405m. The survey results provide indicators of strengths and weaknesses of IT services and a basis for benchmarking against peers as well as indicating firms future spending priorities.

The survey, exclusively aimed at investment management companies, indicates a continued year-on-year increase in IT budgets, following the significant decline experienced in 2003. The figures point to a managed increase in spending (6% in 2004, 8% in 2005) compared to the double-digit increases experienced at the end of the bull market. Much of the rise is accounted for by increases in discretionary IT expenditure (as opposed to ‘business as usual’ spend) indicating a return to investing in business sponsored IT projects. This investment is dominated by spending on front office systems, with a specific focus on systems to support fixed income and derivatives. Client-focused developments (client reporting, CRM, etc) were surprisingly low priorities.

Commenting on the survey, John Robertshaw, Principal at Investit said, “With five years of data, the IT Value Survey now enables Investit to develop strong trend information. Participants use the information both as an internal assessment of how their IT is performing and as a basis for sensible benchmarking against peers. The objective of the survey is to provide an informed opinion on questions such as ‘are our IT spending levels correct, how good are our systems, how do they compare with our competitors and what are they doing?’. While we aim to maintain the inherent simplicity and consistency of the survey it is revised annually to make sure that it is in line with current market needs.”

Investit found that whilst IT spending levels are growing, they are not increasing as fast as other revenues or costs indicating that investment management companies’ IT costs have been controlled more aggressively than non-IT costs. Investit’s figures for 2004 and 2005 show an industry average ratio of IT spend to revenues of around 9.5% and IT spend to costs of12.0%. By comparison 2001 figures were 13.5% and 16.8% respectively. IT spending per head (full time employee) has been more stable settling at around £23,000 in 2004 and 2005, compared to £25,454 in 2001.

Investment management companies cited increased operational efficiency as the key driver for increased IT spend resulting in the need to invest in IT infrastructures, e.g. desktop upgrades as well as new business projects. However, business enhancing projects supporting investment performance and new business developments also scored highly.

The returns supported the continued interest in business process outsourcing. However, a very different picture emerged with trends for IT outsourcing where little enthusiasm was expressed for furthering the outsourcing of IT functions. Equally, there was little evidence of IT offshoring - with those that did belonging to larger financial groups with existing offshoring relationships and a corporate strategy to offshore.

The survey also revealed the growing influence of electronic trading, both through the use of alternative trading systems and the use of FIX. The majority of participants are active FIX users and all participants expressed an intention to use FIX more in the future.

Investit is currently signing clients for the 2006 IT Value Survey – building on the foundations of the previous four years, the survey is now more extensive and involves major global managers, who include data from all their offices around the world.

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