Transforming pension fund management with the cloud

Navigating the investment landscape can be challenging for anyone responsible for managing pension funds. Leaders must keep up with the latest investment trends and opportunities, all while supporting the needs of stakeholders. However, traditional investment processes can be slow and outdated, posing obstacles when it comes to managing large sums of money on behalf of workers.

What if there was a transformative solution for managing pension funds? Amazon Web Services (AWS) offers personalized investment solutions for investment firms using cutting-edge machine learning (ML) technologies. With AWS, pension fund managers can benefit from improved risk management through a highly reliable cloud infrastructure and operational support. Additionally, AWS supports 143 security standards and compliance certifications, more than any other offering, which can help firms in protecting sensitive data, meeting compliance requirements, maintaining business continuity, and more. These factors can help firms minimize financial risks and maximize investment opportunities.

By utilizing cloud-based services, pension managers can harness advanced data analytics, gaining valuable insights that inform investment strategies. This empowers leaders to make well-informed decisions that align with the needs of stakeholders.

Pension fund management from past to present

The history of the pension fund industry dates back centuries, but the modern pension fund industry can be traced back to the 19th century when pension plans were established for government employees in the United States and Europe. Today, the pension fund industry is a global industry with trillions of dollars in assets under management. Before the advent of cloud technology, pension fund investment firms operated through manual processes involving a lot of paperwork, phone calls, and in-person meetings. Investment firms conducted research and analysis to identify investment opportunities; traders executed trades through brokers and trading floors; portfolio managers decided which assets to buy and sell; and reports were generally provided through paper statements or in-person meetings.

As the pension fund industry has evolved over the centuries, so too has the technology used to manage and invest vast amounts of money. In the past, investment firms relied on manual processes and paper-based reporting to make informed decisions about which assets to buy and sell. However, the challenges facing pension funds today need a more sophisticated approach, one that uses data analytics and cloud technology to maximize returns while minimizing risk.

How can cloud technology help pension fund managers?

Pension funds manage and analyze vast amounts of data, such as investment data, member data, and regulatory data. They need to use this data to make informed investment decisions, manage risks, and comply with regulatory requirements. AWS provides a suite of data analytics tools, such as Amazon Redshift, Amazon EMR, Amazon Glue, and Amazon QuickSight, which enable pension fund managers to process and analyze large volumes of data quickly and simply. These tools can also help identify patterns and trends that are not readily noticeable to human analysts, allowing pension fund managers to make more informed investment decisions. The National Bank of Canada’s Global Equity Derivatives Group (GED) used AWS to process and analyze hundreds of terabytes of financial data, conduct data manipulations in one minute instead of days, and scale and optimize its operations.

Pension funds must also manage risk. The complexity of financial instruments has made it difficult to effectively manage different types of risks, such as market risk, credit risk, and operational risk. High performance computing (HPC) on AWS offers cloud-based services that provide access to HPC resources such as networking, storage, and compute on demand. By utilizing HPC, pension funds can perform complex risk simulations and stress tests to manage and mitigate risk more efficiently without the need to manage and maintain the on-premises infrastructure. For example, the Bank of Montreal (BMO) used AWS to build an elastic platform for calculating risk metrics, run multiple risk metrics and regulatory stress calculations in parallel, and scale computational capacity for future regulatory requirements. Using HPC on AWS, pension funds can analyze vast amounts of data, run simulations and models, and identify potential risks and opportunities more accurately. Additionally, HPC can reduce the time needed for complex calculations, resulting in faster decision-making and shorter time-to-market for new investment products. Through HPC on AWS, pension funds can simulate different market scenarios and evaluate their impact on the fund’s portfolio.

Cybersecurity is another significant challenge for the pension fund industry. Pension funds deal with vast amounts of sensitive data, including personal information of members and investment data. As cyber threats become more sophisticated, pension funds must have robust cybersecurity measures in place. AWS offers various cloud-based services that can help pension funds strengthen their cybersecurity strategies. These services include Amazon GuardDuty, AWS Security Hub, AWS Identity and Access Management (IAM), and Amazon Inspector. GuardDuty and Security Hub can provide continuous monitoring of the pension fund’s AWS environment for threats and vulnerabilities, while IAM allows administrators to manage user access to resources securely. Amazon Inspector is an automated vulnerability management service that continually scans AWS workloads for software vulnerabilities and unintended network exposure.

Finally, pension funds must meet increasing demand for personalized investment solutions. Members want more control over their retirement savings, and they expect pension funds to provide tailored investment solutions that meet their individual needs. AWS provides a suite of services, such as Amazon Bedrock, Amazon SageMaker, and Amazon Personalize, which can help pension funds develop personalized investment solutions for their members. These technologies use machine learning (ML) and artificial intelligence (AI) to provide investment advice based on an individual’s goals, risk tolerance, and financial situation.

What’s next for pension fund management in the cloud?

To embrace the benefits of cloud technology, pension fund managers can assess the following strategies for using the cloud:

Establish a digital transformation strategy – Develop a comprehensive plan for using technology to improve operations, reduce costs, and enhance the customer experience.
Invest in data analytics tools – Implement tools such as AI and ML to help manage and analyze data more efficiently and accurately.
Prioritize cybersecurity – Make sure that robust cybersecurity measures are in place to protect sensitive member and investment data.
Embrace cloud technology – Develop a cloud strategy that aligns with business goals and objectives and assess the suitability of cloud providers. Customers can use the AWS Cloud Adoption Framework (AWS CAF) to identify their cloud enabled strategic business outcomes.
Provide personalized investment solutions – Invest in robo-advisory technologies to provide personalized investment advice to members. You can build a conversational interface such as chatbots and virtual assistants to provide personalized experience for your customers using Amazon Bedrock, a fully managed service that makes foundational models (FMs) from leading AI startups accessible via an API.
Foster a culture of innovation – Encourage employees to experiment with new technologies and approaches and provide resources and support to help them do so. AWS Skill Builder provides resources and training to help customers acquire the necessary skills and knowledge to build and deploy applications on the AWS. It offers a range of learning paths, hands-on labs, and self-paced courses designed to enhance proficiency in AWS services, architectures, and best practices.

Conclusion

As the pension fund industry evolves to meet the dynamic needs of their members, technology can help address some of these emerging needs. AI, ML, advanced analytics, and robo-advisory technologies can help pension funds manage data, mitigate risk, improve cybersecurity, and provide personalized investment solutions. As the pension funds industry continues to evolve, pension fund managers can embrace technology to provide better retirement savings solutions for their members.

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