CURO FUND SERVICES – Investment Lifecycle Covered With Curo

As the coronavirus pandemic continues to sweep the globe, leaving more than a quarter of the world’s populations locked inside their homes, governments and big businesses are coming together like never before to find solutions to the raft of problems that have emerged.

Aside from global emergencies such as this, it is rare that you would find such collaboration from what are usually competing organisations. Without doubt, the results will be positive and people will be able to look back at the cooperation as an example to follow.

In South Africa, while major competing businesses coming together is an unusual situation, it has happened in the past with great outcomes.

In 2012, two of the country’s and continent’s biggest asset managers joined forces to solve a common problem. Sanlam and Old Mutual had been outsourcing investment and asset management administration to JP Morgan. Prior to this, Sanlam had created a business in 2001, Tasc, to handle investment administration activities. Tasc was purchased by JP Morgan, retaining Sanlam as a client, before adding Old Mutual’s administration function to the portfolio. But JP Morgan eventually pulled the plug and discontinued its service provision in 2011. This was devastating for both Sanlam and Old Mutual. The pair came together in what was a catastrophic situation and quickly went about establishing their new third-party outsourced investment and asset management administration business. Curo Fund Services was formed, and the company has grown to employ 300 people, administering more than R2 trillion in assets under administration.

“Overall, the business has built a brand that is recognised in the industry and that is a major milestone, essentially creating a business that started off in a crisis,” says CEO, Barri Maggott. “If your fund administrator cancels your contract and then hands the business back to you, that is not the ideal way to start. To achieve sustainability and being able to meet client’s needs, when we had the start we did have, it really is significant for the business.”

He is confident in the partnership that has been formed, saying: “On almost every other front, you would find these two large insurance companies slugging it out in the marketplace as competitors but for this particular business, they are collaborating. At the end of the day, they both require a very similar service and so collaboration makes sense – so far, it has gone well.”

BACK OFFICE FUNCTION

Many asset managers prefer to outsource their administration function for three key reasons. Firstly, it can provide cost savings and flexibility. Secondly, it allows for quality as the provider will usually have a large pool of skilled resources to work with. Lastly, is simply to allow asset managers to concentrate on what they do best, centering on their core focus.

“Asset managers who manage funds and portfolios on behalf clients are focussed on managing the money and making investment decisions. The rest of it is handled by us,” explains Maggott.

Much of the unseen work – the less sexy activity that keeps transactions moving – is so vital, but often overlooked. But it is important and valuable. This is why Curo goes above and beyond to ensure the process is smooth for clients.

“On a daily basis they will buy and sell various instruments to help deliver the type of performance that their clients are looking for. Those trades have to be processed, settled and accounted for,” details Maggott. “Settlement, confirmation, accounting and ultimately repricing the fund on a daily basis is what we do. Front office is about trading, back office is about accounting and settlement and the rest. From a strategic point of view, we are trying to create a very seamless service for our client so the asset manager can focus on trading and performing their front office functions of portfolio management and buying and selling as they need to and the back office happens seamlessly in the background.”

As and when the portfolio manager makes buy and sell decisions, they will flow seamlessly into the Curo environment and the company can pick them up and handle all of the functions required to develop a new net asset value for the portfolio and other reports that are required. “We support the asset managers in achieving their business objectives,” states Maggott.

DIGITISING TO MANAGE RISK

South Africa’s financial industry went through a wave of digital upgrades in the early 90s and that progress has continued unabated ever since. Today, the appetite in the industry for more technological advancement is strong. Curo is well-aware of the demands of the industry and is investing properly to ensure its clients are well catered for and its model remains at the cutting edge.

Digitisation has long been a part of the company’s strategy and today plans are in place to overhaul processes, removing unnecessary human interaction and reducing risk.

“The investments that we are making are to help implement that strategy,” confirms Maggott. “Technology is an important aspect of our business so we are looking for high levels of automation, seamless processing, high levels of integration between front and back office, and the tools and technologies we are implementing will give us the ability to operate in that way.

“It’s about being able to automate the flow of information from the asset manager to the administrator and back again.”

Recently, Curo struck up a partnership with international industry leader, Temenos, to move funds to a new accounting platform.

The product from Temenos is called Multifonds and provides simple architecture, enabling more automated exception-based processing to increase efficiencies, reduce costs and open up new opportunities for growth.

Curo is busy migrating more than 3000 funds from its five legacy fund accounting platforms to a single Multifonds Global Accounting platform.

“We are in the process of moving from our existing system onto Multifonds, supplied by Temenos, and it will help us to focus on our new model that will bring us into a more digital position,” says Maggott.

Temenos was equally proud to onboard South Africa’s largest third-party administrator.

“We are delighted to form this new partnership with Curo to support its business,” said Oded Weiss, Managing Director of Temenos. “Curo, like many fund administrators, are viewing their technology platform not just through the traditional lens of efficiency and cost, but the future opportunities it can create by helping them enter new markets, launch new and innovative services, and win new business.”

For Curo, the switch helps to provide cost effectiveness, but this is not the key driver. Delivering quality service for clients is the most important target, and by reducing human input and reducing risk, the company is better placed to offer best-in-class service.

“A process that has manual intervention where people are capturing information has a high level of risk. If you make a mistake you can strike the incorrect price, and that has an impact on the client and the market,” explains Maggott. “If it were to happen, it would mean that we would need to make good on those errors. We need to run a tight ship and when you have manual intervention your risk goes through the roof. Automating systems helps to operate consistently. Manual processes are impacted by people being off on leave, having a bad day or struggling with volumes. In the market these days, there is a lot of volatility and this causes the volumes to creep up. The only way you can really hedge against that is to increase your levels of automation that help to provide straight-through processing.”

With the advent of digitisation, robotics and AI across many industry sectors, Maggott is keen to ensure the human touch is not lost altogether. For a third-party administrator, people analysing data and making decisions is vital.

“Robotics have a role to play but you need to guard against automating weak processes. We want to focus on fit-for-purpose solutions by increasing automation as much as we can but only where it makes sense,” he says.

BEST-IN-CLASS, GLOBALLY

Working with the likes of Temenos and other industry leaders to digitise and de-risk the business, Curo is hopeful that in the future it will be able to expand beyond South Africa’s border and provide administration services in new geographies. Both of its anchor clients are active globally, and its new system is internationally recognised. In the long-term, Maggott is certain that Curo can be successful in other markets.

“At this stage, it is not explicitly on our agenda although we have had the growth strategy discussion with the board and we are actively preparing for international markets,” he says. “It’s certainly a longer-term goal. Our three to five year focus is on the local market and growing market share here. And then we will look at international markets and that is why we are ensuring the products we are building now are suitable. Growth is definitely a long-term strategy but for now we need to build a service that embraces global best practice. That is why we are selecting tools like Smartstream and Temenos/Multifonds which is actively used in overseas markets.

“We believe there is a similar opportunity globally for delivering a much more highly automated, straight through process from asset manager to administrator. That is not a service that we see being run well across the globe so there is definitely opportunity there. Our initial focus is on building the product for the life sector of our local market.”

Following Sanlam and Old Mutual, Curo would potentially look at the UK and European markets as first targets. The regulatory environments are similar and, importantly, the two big customers are already active there. “It would make sense for us to adopt that strategy by following our clients into international markets where they already operate.”

But as the brand and its expertise become recognised, there is no reason that the company can’t go further afield. Current growth targets include dominating the local asset management market, gaining 50% share in three to five years. Equally, the company is focussing on life insurance companies with a dedicated asset manager – a niche that Curo wants 80% of.

“Our strategy of approaching life-backed asset managers has opportunities in North America and Australia where we believe the product we are building will have some relevance and impact.

“We definitely have aspirations to chase after bigger markets than we have already.”

It is important not to rush into growth strategies with haste and Curo will work on its current push over the next three to five years as it wants to guarantee a harmonious tech integration that will advance its position.

“We need to make sure we deliver the benefits we have set out by building this product and making sure it works effectively for our existing clients,” insists Maggott. “We will then look to grow our client base. We don’t believe you can do it at the same time as trying to grow on top of a complicated base adds unnecessary complexity. We are trying to streamline the product, make sure it gives us the edge in the market, and then go after the volumes with new clients.”

PEOPLE PUSH

Asset and investment management third-party administration is a unique industry and you cannot simply fall into a job without some knowledge, training and experience. With the skills shortage present in South Africa today, across all industries, for administrators to attract the best talent, you must stand out. This is why Curo has sought accreditation from the Dutch-based Top Employers Institute, a global organisation that reviews and awards recognition for companies that go above and beyond for their people.

Curo has achieved the Top Employer status for 2020 and Maggott is proud. “It has been a clear focus for us and we now have the recognition which is great,” he says.

“We believe that we need to be recognised by the market and clients for having a fully engaged and focussed team. The research shows that companies with disengaged workforces or teams are less likely to achieve their objectives. We believe that having an engaged team has a direct impact on our client’s experience. We are a client facing business and much of what we do is measured by how well we are servicing our client or how good the client experience is. We believe it is important to have teams that are happy, focussed, engaged and motivated, and as much as that sounds like traditional soft HR talk, we believe it’s pretty hard stuff.”

According to the Top Employers Institute: “Curo Fund Services provides exceptional employee conditions, nurtures and develops talent throughout all levels of the organisation and has demonstrated its leadership status in the HR environment, always striving to optimise its employment practices and to develop its employees.”

Of course, a certain level of competence is needed when joining the Curo team, but Maggott explains that the recruitment process is made more challenging by a lack of mindset traits rather than basic skills. Most job roles can be taught, but attitude and mentality are more difficult to instil. This is a problem in traditional recruitment says Maggott.

“For us, it’s less about finding industry skills or people who understand fund accounting. The bigger challenge is finding people with the mindset that we need to transform the business. We are looking for people that are proactive around client needs, looking for digital solutions, leveraging technology and challenging what has become the norms of how we operate. It is more difficult to find people with this mindset who can think in the digital economy, who can assimilate the potential impact of new technologies, and how we can leverage those for the benefits of our clients.

“People with leadership potential, people who are prepared to challenge the status quo, and those who are open to new technologies and innovation – all underpinned by attention to servicing the client – that is what we struggle with more.”

As digitisation is achieved throughout the business, human error risk will be reduced but the target is not cost savings through reducing staff numbers. Automation in some areas will free people up to develop new competencies for clients, therefore growing the business.

“We can’t bury our heads in the sand and hope that disruptive technology and automation will pass us by,” states Maggott.

“We will seek to add more value to the client by adding more skills than we currently provide, and that will need people with greater skill. It’s all about staying relevant for our clients. For us to say we want to push away automation or we want to push away technology, that would be the wrong approach. We need to embrace it and adapt to new technology quickly so we can use it to benefit our clients.”

ECONOMIC BATTLE

While Curo is extremely well-positioned in the market, with robust clients and a large base under administration, it will have to adapt its approach to successfully navigate the coming months as coronavirus fallout and economic sloth in South Africa are magnified.

For Maggott, the key is remembering that markets are cyclical and a prepared company is a well-placed company.

“In our business, our revenue stream is linked to the value of the assets that we administer. When the JSE goes the way it has, that impacts our streams as the value of the assets we administer is reduced and our fees are based on that value,” he says. “There is a very real short-term revenue implication. But we believe that markets are markets – there are always things that happen that cause volatility and cause drops. At the same time, our clients – the asset managers – will be saying to their clients, don’t panic, this is a crisis but we have seen crises before and we will come out on the other side. We share that sentiment and recognise that this does have a short-term impact on us and our revenue but markets are cyclical and it will correct. It’s about having the robustness in the business to manage through the crisis until revenue streams return. In the meantime, it does require us to be smart about the way we manage our costs and looking carefully at the way we spend our money as there will be a lasting impact from the virus on the markets, but we certainly believe in correction over time.”

For the most innovative and creative companies, times of crisis present opportunities. Those that are investing cleverly during hard times are often those that boom when the tide turns. Curo’s approach to digitisation will help keep costs down for clients, and this is a major attraction right now.

“By managing our cost base, we will not pass on additional cost to clients and that will assist them to see this current cycle out. In an asset management business, fund administration or outsourced services is a big cost on the income statement so for us to help keep rates flat will be a significant support during these tough times.”

The approach of the CEO, who has been with Curo for four years but in the industry for the majority of his career, is to keep calm. Perhaps easier said than done during times of market calamity, but Maggott is certain that businesses must remain calm to ensure no chance is overlooked.

“If we allow ourselves to be overwhelmed by the economy and all of the issues we have had in the country, we may run the risk of missing opportunities. We certainly believe in and are committed to the success of team South Africa and there is a long road ahead to recovery for our economy but we have to make sure we work together by supporting each other and using technology as an enabler to enhance service.”

CARE, LOOK AFTER, MANAGE

 The Latin word Curo holds the meaning of managing, caring for or looking after. This is the very heart of the what the business does and guides its mission: “Take care of our staff, look after the administration of our clients’ assets, and manage business well, with honesty and integrity in all that is done.”

Asked if the company is achieving its mission, Maggott is happy but certainly sees more potential for improvement. “I am happy to say that we do. I would add that we are not yet 100% satisfied with the way we do things,” he says.

“Over the last two years, we have made significant progress towards a much more digital way of doing things and that will ultimately improve the skills of our staff and the experience of our clients. There is also a lot we are doing in the way we manage the business to ensure we look in the mirror at a good corporate citizen. We do still have ambitious goals and we think we can make drastic improvements across the business to achieve our goal in a much more meaningful way.”

As the company embarks on its growth plan over the next three to five years, Maggott is filled with confidence citing aspirations that Curo set out when he started now becoming realities.

“There’s a lot still to be done and a lot still to achieve,” he says. “Even in recent weeks and months we are seeing the results of the visions that when I started were like pipedreams. For me, that is very exciting as things materialise and new opportunities come about. As we continue, there will be a lot more to get excited about and that is what drives me.”

With a bright future ahead of it, albeit dimmed somewhat by recent circumstances, Curo is without doubt an example to follow for those companies seeking sustainability and strength. Beginning as a result of an unheard-of partnership, growing to become an industry leader, and looking to the future for opportunities, Curo Fund Services is the epitome of professionalism.

“We still believe there is a lot of opportunity if we go about it in the right way,” concludes Maggott.