Asset managers embracing data and analytics tool kits are poised to outperform the competition in the emerging industry landscape.
According to a global survey of over 400 asset managers and institutional asset owners conducted by State Street, asset managers will need more advanced data tools to support multi-asset investment solutions sought by many institutional investors.
Challenges confronting asset managers
According to the State Street survey, asset managers’ tools and technologies are not always capable of supporting the new outcome-based investment solutions that clients increasingly demand. The asset managers who want to tap the growing market for more sophisticated investment strategies will need to integrate their risk and performance technologies much more effectively. This would necessitate capturing data on less traditional asset classes and integrating these data streams to build a coherent view of risk and performance.
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The survey also reveals that regulation, too, strains asset managers’ data and analytics capabilities. The industry has to adapt to several regulatory proposals. These include centralized clearing of the over-the-counter derivatives, and other Dodd-Frank provisions, Foreign Account Tax Compliance Act reporting, and capital requirements under Basel III / CRD IV. Moreover, the Alternative Investment Fund Managers Directive too will affect managers that want to service the growing demand for alternatives.
According to the survey, “the growing volume of trading data” is one of the most important trends driving change in the way asset managers will manage their investment data over the next three years.
Data leaders vs. data laggards
The State Street survey reveals a divide in the investment industry between ‘data leaders’- institutional investors that strongly feel they can harness data for competitive advantage – and ‘data laggards’ who struggle to extract value from a growing mountain of data.
As captured in the following diagram, the survey reveals the data leaders consistently outperform their peers across many vital areas.
Five forces of change
According to the survey, asset managers are redesigning their operating models and data infrastructure in response to the following five forces of change:
For instance, the shift toward more electronic trading would imply asset managers need to give their portfolio managers the tools to make better, more informed investment decisions. This would necessitate asset managers invest in integrated technologies that can deliver real-time data, more intuitive tools for portfolio optimization and more integrated tools for order execution.
The State Street survey concludes that the ‘data leaders’ that have invested in advanced data management are already harvesting the rewards. Increasingly, the asset managers that are best poised to dominate the new industry landscape will see past the complexity of today’s data systems, to seize the opportunities ahead.