Should you outsource regulatory calculations, or keep them in-house?

The decision is less about the calculation itself and more about whether you can evidence it and keep evidencing it as the rules change.

PRIIPs, UCITS, SFDR, AIFMD Annex IV and now UK CCI each carry their own calculation methodology, and most investment managers run them through several disconnected vendors. Treated as a series of one-off supplier decisions, that looks manageable. The COOs and heads of risk who get this right look past the vendor fee to the knowledge sitting behind each number.

1. What does a calculation actually cost?

Most business cases compare a vendor fee with the cost of running calculations in-house. The fee is the visible cost, and usually the smaller one. The larger cost is knowing which methodology applies, why, and keeping that knowledge current as regulators update it.

Before you decide, you should be confident that you understand:

Which methodology applies to each product category, and how your interpretation compares with your regulator's

When a methodology change flows through to figures you have already published, and who is responsible for catching it

What happens to your reconciliation and sign-off deadlines when a number needs restating

Who in your firm can explain, unprompted and in full, how a specific figure was derived

None of this is difficult for one regulation. The difficulty is that very little of it works the same way for the next one.

2. Why does calculation complexity not scale like headcount?

Every regulatory framework brings its own methodology, its own inputs and its own change cycle. Your team has to learn each one, keep it current as it evolves, and stay in the role long enough for that knowledge to be worth anything.

Our FE fundinfo calculation service covers 10+ regulatory frameworks across 20+ European markets, so adding one more client, or one more fund, is incremental. The methodology, the validation logic and the regulatory relationships already exist. In-house, every new framework begins from a standing start and then has to be maintained indefinitely. Cost accelerates with every regulation added, not the other way round.

In practice, the risk in keeping calculations in-house is rarely the maths. It is the same handful of people who understand why a number moved.

3. How far does one regulatory change actually reach?

A methodology update looks like a single event. Depending on where it lands, it can be the start of a chain of recalculations across every framework that shares the same underlying figures. A change to a cost disclosure methodology, for example, can affect PRIIPs KIDs, MiFID II cost reporting and national templates at the same time. UK CCI, AIFMD II and SFDR II are also each moving on their own timetable, so a single regulatory quarter can bring change that reaches some of your funds and not others.

The difficulty is rarely the methodology itself. It is knowing everywhere a figure feeds into. Where the inputs and outputs for each framework sit with a different vendor, every change starts as a reconstruction exercise before it becomes a recalculation exercise, and a calculation can fall out of scope without anything visibly breaking, until an auditor, a regulator or an investor asks the question.

A single calculation record removes most of this risk. Scoping a change becomes a lookup rather than an investigation, the impact can be checked before it reaches a document, and the methodology behind it is documented rather than remembered.

4. What stays with you, and what moves across?

Outsourcing calculations does not mean outsourcing accountability. Conducting Officers and boards keep accountability for what a fund publishes, and the data feeding a calculation still comes from you. What moves across is the day-to-day execution:

Running the calculation itself, against the current, correct methodology for each framework

Tracking methodology change as regulators publish it, and applying it consistently across every affected output

Keeping inputs, outputs and methodology in one place, instead of split across vendors

Being able to answer, in full and without delay, how a specific number was arrived at

Key takeaway: the question is not whether you can run a calculation. It is whether you can hold the methodology for every regulation you are subject to, and keep it correct as the rules, and the calculations they touch, change.

FE fundinfo's Calculation Centre is built for this exact problem. Instead of methodology knowledge sitting with a handful of people or being split across a different vendor for each framework, it's built to hold the methodology, inputs and outputs for your regulatory calculations in one record. We run the calculation, track the change as it happens, and give you what you need to audit any figure, in full and without delay.

Ready to review

How your regulatory calculations are produced, and how the next regulatory change would reach them? Speak to our Calculation service team about the frameworks you run today and where the knowledge for each one actually sits.

Speak to our Calculation service team