In response to the investment industry’s desire to extract value from all aspects and functions of its firms, Oaks-based SEI, a financial services company, conducted a survey with FSO Knowledge Xchange (FSOkx), a provider of analysis and marketing solutions.

SEI recently concluded that an asset management firm’s middle-office functions, despite not having a consistent industry-wide definition, has emerged as a critically important operational component and a largely untapped source of value.

“Our research backs up our belief that the middle office has emerged as a critically important operational component of investment firms globally, whether they manage long only, alternative, or hybrid strategies,” said Stephen G. Meyer, Executive Vice President of SEI.

“Sophisticated managers are looking beyond the status quo to transform their middle offices from being mere support functions to a source of long-term, strategic, organizational value.”

According to SEI, despite a definitional disconnect among participating managers, middle-office functions clearly play a vital role in an investment firm’s operations, with many firms dedicating a considerable percentage of overall operational expenses to the area.

Survey results indicate that 1 in 4 asset management firms now devotes 20 percent or more of total operating expenses to middle-office functions. Another 37 percent of respondents spend between 11 and 19 percent of their total operating costs on middle-office expenses, with diversified investment managers spending slightly more than strictly alternative managers.

Additionally, about 91 percent of survey respondents expect to spend more on middle-office technology over the next 12 to 18 months.

SEI’s report examines the new frontier of operational challenges and provides insights to help asset management firms better understand middle-office trends, challenges, and opportunities. Of the 80 respondents, half were operations managers and chief operating officers.

Click here to read more about SEI’s report.