The best pension fund software is both broad (covering many functional areas) and deep (covering all nuances a pension manager needs). This article goes into why and what those capabilities are.
We recommend having one single pension software that can handle all workflows for all asset classes and investment types. The primary reason is that almost any investing activity affects cash. And you only have one pool of cash to manage, not one per asset class or investment type.
When you apply look-through on constituent/holding level, it’s beneficial for the software to model the underlying investments natively – regardless of whether that’s equities, fixed income or derivatives.
Some systems might claim to be cross-asset, but that term can be misleading. Technically, it’s enough to support 2 asset classes to claim it. Equity is a broad term, and private investments differ in handling (technically for a system) from public equities.
Look-through is again a prerequisite for fund investments. The challenge of PE/VC-funds or direct private investments is further complicated since they primarily invest in private companies that might not report ESG data. In such cases, the pension fund software must be able to ingest proxy-data based on firmographics. In other words, for each holding company of a PE/VC-firm, map out what public companies are similar to those companies and approximate the ESG data based on that comparison. See Limina’s ESG capabilities in action today (no strings attached).
The functional breadth of a system is one of the most challenging considerations. It’s not common for one solution to cover all the depth (such as look-through, cross-asset and ESG capabilities) and the breadth (from pension fund accounting software to rebalancing) you need. Limina is uniquely well-fit specifically for pension funds.
The illustration below shows the possible functional areas to the left (divided in front, middle, and back). Each of the columns illustrates a system landscape
The blue is where Limina can fit in each setup.
Having a broad platform with all capabilities in one place can lead to significant operational gains and cost savings. It reduces the amount of data that must be synchronised between systems.
A cloud-native system (Software-as-a-Service, SaaS) is today the gold standard. Any system must provide secure access, support single sign-on (SSO) and be securely online accessible (at least via the web). If this isn’t the case, you know immediately it’s an old software that will be inferior in most aspects.
Assuming the platform you’re evaluating is deep enough in all functional areas, there are three more areas to consider before deciding.
Even with an all-in-one system, you still need to connect for trading, to custody and often with a few other service providers or systems. There are 3 types of connectivity:
Exception-based workflow processes are an alternative to manual processes. Examples of tasks that the system will perform:
If issues are found, the pension fund management software will notify users. Some systems, like investment data management software, have this functionality. However, it makes less sense as a separate system because it adds a data complexity layer by being in a separate system.
We’ve observed that up to 10x more controls, checks and tasks are performed by managers with exception-based workflows enabled, without larger teams.
Reporting requirements are now much easier to meet since:
As a cherry on top, pension fund management systems like Limina have native Excel-plugins.