Increased buy side demand for streamlined data access, including full aggregation of all operational resources, continues to be front-of-mind for the asset servicing segment. In addition to receiving actionable insights, clients are looking to boost their data literacy, with the ultimate goal of enhancing overall performance.
And with good reason. Allowing process fragmentation to go unchecked perpetuates operational inefficiencies, leading to potentially significant cost overruns, while preventing firms from achieving an accurate view of enterprise-wide risk conditions. Additionally, fee structures that are directly tied to fund performance put even more pressure on managers to rein in excess expense.
Maintaining multiple disparate systems can negatively impact data quality and timeliness; bringing aboard additional solutions to accommodate newer asset classes may only exacerbate these problems. Accordingly, it is imperative that managers continue to seek integrated multi-asset platforms in order to maintain the integrity of their data.
In an industry that has long recognized the significant value within value-add service offerings, data is now widely viewed as the most pivotal piece of the pie. As the need for faster, more sophisticated investment information reaches a fever pitch, providers are quickly shifting their resources to become more data-focused.
Accordingly, data-as-a-service, or DAAS, has in effect become the new software-as-a-service, facilitating the delivery of data-on-demand, across the globe and, using open-sourced technology, available cross-platform. Having a single source of information allows portfolio managers to make more informed investment decisions, accurately calculate NAVs (net asset values) and sharpen other essential processes.
How big is big data at present? In its report “At the Tipping Point” on the potential for cross-asset disruption, advisory firm EY noted that some 90% of today’s global data was created within the last two years alone. As such, managers must have the means to efficiently harvest the infinite flow of information in order to identify opportunities in the making and, in turn, develop successful investment strategies. As more firms utilize machine learning and artificial intelligence as part of the decision-making process, full automation of the investment lifecycle continues to gain traction, giving managers with the proper complement of data-sourcing tools a significant advantage, according to the report.
The word seems to be getting out. According to a new survey from WBR Insights in collaboration with SimCorp, some eight in 10 managers ranked better access/accuracy of data number-one in terms of tackling strategic priorities; “Empowering Multi-Asset Front-to-Back Investment Operations” also revealed strong support for consolidating systems and reducing system interfaces, reducing/eliminating manual activities, as well as maintaining a single investment book of record (IBOR).
While typically the byproduct of outdated legacy systems, data silos continue to affect many on the buy side, and have been particularly prevalent among acquiring firms that fail to incorporate new data sets. Without proper guidance, integrating all of these disparate sources of information could pose an enormous challenge, even for companies with appropriate resources.
Thus, consolidating resources through a multi-asset, IBOR-based platform is essential for those seeking a one-off, enhanced data portal. This “single source of truth” gives clients access to the most consistent and timely information available, adding stability to the investment portfolio, while also improving risk-management readiness. As investor preferences grow increasingly diverse, having an integrated platform can help streamline the onboarding of newer asset classes, as well as forays into emerging territories.
Additionally, data integration allows firms to address their regulatory readiness—no small feat given the compliance/disclosure requirements under FATCA, IFRS and similar statutes. By addressing vulnerable business segments, companies have the wherewithal to build a more expansive and diverse global portfolio.
For their part, providers have responded with new solutions designed to satisfy customers’ growing data demands. In the US, BNP Paribas is one of the few providers of integrated custody, fund administration and middle-office services through its Neolink client portal.
Another key factor: giving clients the ability to access and extract data on a self-serve basis. An in-depth understanding of a client’s business structure, as well as outfitting the client with the right set of tools, is paramount in order to create a unique value-add model that compliments the overarching DAAS strategy.
Despite ongoing interest in OTC derivatives and other emerging opportunities, asset managers may not yet be completely capable of handling the big-data requirements that such strategies require. Lack of front-to-back synchronization remains a major impediment; without proper integration in place, operational breakdowns and inaccurate data are more likely.
As both a leading consumer and generator of data, the buy side faces major operating challenges that call for top-flight processing solutions. Rather than spending significant capital on an internal framework, clients can obtain big-data technologies on an outsourced basis, allowing them to focus exclusively on achieving their core investment objectives.
To optimize their data usage, managers must have the means to organize and analyze all internal and external information. Using a platform for integrating front, middle and back offices gives firms a 360-degree view of all mission-critical data, including both current and historical positions, at all times. Like the best traditional service offerings, DAAS has the capacity to significantly lower costs, boost revenues, as well as address risk and regulatory requirements, creating a more stable and scalable business in the process.
For example, BNP Paribas has created a ‘Trusted Data Factory’ and will partner with clients to provide a consolidated and secure data services layer. Structured and unstructured data from multiple internal and external sources can be normalized, integrated and distributed via an optimum user experience.
While bringing the requisite systems in-house is not out of the question, the time, resources and personnel needed to successfully manage a multi-sourced data platform can be considerable. Not surprisingly, accessing a purpose-built, third-party ‘Trusted Data Factory’ solution set is widely seen as the most efficient and cost-effective route for asset managers.
As noted by Tabb Group in its recent research, the trend toward DAAS has been driven in large part by clients who are no longer willing to accept data delays due to lack of integration. “Clients want everything in one place so they can understand all of their exposures,” remarked Dayle Scher, Tabb senior analyst. “They don’t want to wait for their asset servicer to pull data from different systems. They want to be able to log in, pull data and create their own reports. They want data and they want it now.”
As firms continue to seek strategies for consolidating disparate sources of information, a ‘Trusted Data Factory’ is likely to remain a priority for asset servicers. This points to substantial opportunity for qualified specialist third parties over the longer term.
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