Genesis Investment Management

Genesis supports business growth through front-to-back automation based on SimCorp Dimension

Genesis had grown to a point where continued expansion would take an improved and streamlined operating model, requiring enhanced systems. To retain desired control at acceptable cost and risk, Genesis chose a single, front-to-back solution, SimCorp Dimension. Key operations have remained in-house, business users have the functionality they need and, crucially, the solution has been able to handle the higher volumes that have accompanied business growth.

Pioneering origins – and operating model to match

Genesis is a specialist investment management firm, established in 1989, which focuses purely on investment in emerging markets equities for institutional investors. The company’s original operating model reflected the realities of the time for Genesis’ niche, being characterised by the use of commingled vehicles to reduce the administrative burden of trading in far flung emerging markets. Market trading was voice-based and the operation was heavily dependent on custodian settlement and safekeeping services. Detailed knowledge of settlements in obscure markets, while resident at Genesis, was not always available at the service provider and complex, manual settlement processes were the norm, as well as a high cost associated with settlement failure. Genesis’ proposition being non-mainstream, clients required customised reporting, however, delivery of this, and of internal reports, necessitated significant manual manipulation of the data output from the desktop tools and records available.

As emerging markets investment became more accepted in the institutional arena, Genesis’ reputation for expertise in the sector burgeoned. In parallel, emerging markets’ investment infrastructures also developed. Automated exchanges and central depositories were introduced, electronic trading became widespread and automated matching and settlement became almost universally available. The reliability of safekeeping services also improved significantly.

Critical mass achieved

All of these factors meant that as Genesis’ business acquired a new scale, the phased introduction of an improved software solution became necessary. Growth in AUM increased the volume of transactions, and the diversity of positions and the number of clients grew, bringing a wider range of mandate restrictions and more complex dealing requirements. The critical mass achieved in the business predicated fresh investment in systems and operations, to introduce significant automation. This would transform the operational model to one that would permit controlled expansion of operations to support continued business growth and to become forward-looking rather than response-led.

"SimCorp Dimension provided a uniquely flexible solution to our needs because of the extraordinary functionality contained in the product." -  Martyn Ryan, Partner and COO, Genesis

Supplier selected

With the decision made to move forward, it was necessary to decide whether to select one system supplier or to base operations around multiple applications sourced from different vendors. Genesis’ operational functions most sensitive to growth, and so requiring attention, were: pre-trade compliance; dealing; settlement; reconciliations (cash balances, dividend accruals, positions, fees, prices, FX etc.) and client reporting. Analysis of the multi-system approach indicated that the costs and risks involved in combining disparate systems would be prohibitive for a firm of Genesis’ size. Furthermore, development and maintenance of the bespoke links necessary between systems in such an architecture would require specialist expertise that would mean retaining a pool of contract IT skills, which Genesis wanted to avoid.

The search for a single supplier identified that the best choice would be SimCorp, which could not only satisfy Genesis’s functional requirements, but do so with its single, front-to-back solution: SimCorp Dimension. This would allow Genesis to keep key operations in-house, support required functionality and, crucially, scale in line with business growth. It would enable Genesis to maintain internal controls, reduce operational risk and to continue to deliver the high quality service which its clients expect.

Current operating model – positioned for future growth

Today SimCorp Dimension forms a system core for Genesis. It handles operational processes from order management and pre-trade compliance right though to feeding data into performance and client reporting. This platform has freed the firm from former system and operational constraints on its ability to grow:

– Order management and trading functions connect into external systems for electronic trading (using FIX), settlement (e.g. Omgeo’s Central Trade Manager) and reconciliation systems, making the operation fully scalable. Sharp peaks in trading volumes have almost no impact on daily operations.

– Internal control functions, including pre-trade compliance, are now automated. Consequently the work of operations personnel at Genesis has changed from routine-centric to become focused on resolving exceptions. This has improved both consistency and flexibility across the operation, reducing operational risk.

– SimCorp Dimension’s construction – a multi-modular system built around a single core database – has meant that Genesis can readily segregate operating duties, which provides transaction security.

– The transformation from routine processing to exception-based operations has reduced operational staffing requirements, allowing redeployment of staff time saved to higher quality review functions where employees’ knowledge and skills can be better utilised.

– System development is effectively outsourced to SimCorp, through the supplier’s ongoing SimCorp Dimension development programme, while the need for bespoke internal interfaces between systems is reduced, again thanks to the system’s design.

Operational efficiency

Genesis’ operation is now streamlined in all areas but particularly those which had been identified as especially sensitive to business growth. The introduction of automated processes has permitted the routine to be handled with precision and freed time to concentrate on those areas of the emerging markets where complex manual operations still continue.

"The resilence of the SimCorp Dimension solution has been outstanding since its implementation in 2007."
- Sally Barr, Senior Manager, Business Analyst & Develpment, Genesis

Operational constraints on growth removed

By basing operations around SimCorp Dimension, Genesis’ business can now grow free of the straightjacket of complex and inflexible systems. The automated platform can handle volumes significantly higher than the firm’s earlier operating models could, securely and efficiently, without parallel adjustments in headcount. This flexibility means that the operation can adjust readily to peaks in volumes, changing business needs and the evolving market infrastructures in emerging markets.

High quality service maintained

One of Genesis’ priorities in implementing SimCorp Dimension was to ensure that the high quality service delivered to clients and internal stakeholders will be maintained as the business continues to grow. With the system now implemented it is evident that this goal has been met: service levels such as settlement failure rate and timeliness of information delivery have improved even as volumes have increased and diversity of markets in which Genesis invests has broadened.

Business processes de-risked

Implementation of SimCorp Dimension has allowed Genesis to reduce risk in many areas of the business. The high degree of automation means that there is much less opportunity for errors to be introduced in operational processes, especially in trading and compliance. The consistency of the data in the system makes report production easier and quicker, so better informed decisions may be made. And the effective outsourcing of core IT development to SimCorp means that Genesis no longer relies on knowledge concentrated in a handful of contract staff.

Operational overhead reduced

Genesis has been able to refocus the work of operations staff, away from now-automated routine processes and on to exception handling. Consequently resolution of operational issues is faster and Genesis can better utilise its skilled resources, in client-focused activities.

IT development outsourced

Genesis can now rely upon SimCorp’s ongoing R&D programme, which involves a team of over 400 software engineers producing regular, twice-yearly releases of SimCorp Dimension. These keep the system up to date, both functionally and technologically, and allow Genesis to effect controlled deployment of required new functionality fully consistent with that already implemented.

"The front-to-back nature of SimCorp Dimension, together with the comprehensive support and maintenance offered, provides and economic and reliliable platform to Genesis."
- Martyn Ryan, Partner & COO, Genesis

About Genesis

Genesis was established in 1989 as a research-driven organisation with the aim of providing clients with excellent investment returns through a company-focused approach to investment. It invests purely in emerging markets equities for institutional investors. The company has developed a strong culture of building and sharing information which is vital to its research intensive process and it recognises the value of robust and open intellectual interchange in making decisions. Genesis’ operational independence and non-hierarchical structure ensure that creativity and entrepreneurial culture is not stifled by institutional bureaucracy and that the business is run by the investment professionals with a focus on generating returns for clients rather than asset gathering. Most of the team have more than fifteen years’ experience investing in emerging markets and have also had first-hand experience of working in a developing country. The investment team is well supported by experienced client service and operations teams. The annualised gross return of a standard portfolio (based on the Genesis Composite) has been over 13% per annum since inception in 1989 to 31st December 2009.