An investment management system is one piece of software on which an asset manager, a pension fund or an insurer runs its investments, from placing an order to doing the accounts. It is also called an IMS, or a front-to-back investment platform. The front office means the fund managers and traders. The back office means the teams that settle trades and keep the accounts. One system serves both.
The system holds every position of every fund. Here is a typical case. A fund manager at an asset management company in Mumbai decides to buy ₹40 crore of a bank's shares for an equity fund worth ₹2,000 crore. She enters the order in the system. Before the order goes out, the system runs a pre-trade compliance check. This means it checks the order against the fund's rules. For example, SEBI does not let most mutual fund schemes put more than 10% of their money into the shares of one company. The fund already holds ₹150 crore of that bank's shares. After the purchase, it will hold ₹190 crore, which is 9.5% of the fund. So the order passes.
The system then sends the order to the fund's traders. Large orders usually go out through algorithmic trading software, which splits them into many small orders. When the trade is done, the system records it and sends it to post-trade processing for settlement.
Every evening, the system values the portfolio. It takes each holding's closing price from a financial data terminal feed and works out what the fund is worth. For a mutual fund, this value is the basis of the NAV, the price of one unit. The system also compares the fund's return with its benchmark, the index that an index provider calculates. A risk model estimates how much the portfolio could lose on a bad day.
Last, the system produces the accounts and the reports. Some firms send this work to separate investment accounting software instead.
Large asset managers and hedge funds sometimes build parts of this software themselves. Most others buy one system from a software company. Two of the largest such companies have engineering teams in India.