What is your data strategy?

More than ever, the ability to manage torrents of data is critical to a company’s revenue growth and success. Even with data-management functions and chief data officers, most firms are behind the curve. 

For many investment firms, sound data management continues to be elusive. There are several reasons for this. Firstly, a number of managers operate off legacy technology systems and infrastructure meaning there is a lack of data centralization and coordination. Furthermore, a large proportion of asset managers will often receive data – usually in an unstructured format – from multiple counterparties making it difficult to aggregate. And finally, a lot of firms believe the only way to solve these problems is to spend vast sums of money on best of breed data management platforms.    

The idea of spending cash at a time of such profound uncertainty is not particularly appealing for many cost-conscious COOs and CFOs.  

The reality, however, is that it is not that difficult or expensive for firms to make material improvements to their data management processes. In fact, the proliferation of cloud-based technology and wide availability of data warehousing solutions mean that it is now increasingly straightforward and relatively affordable for firms to make this transition. As a result, increasing numbers of asset managers are starting to take the plunge and improve their data management set-ups.   

The key benefits 

The strategic benefits of having a centralized data system are obvious to all of those who have it. Rather than operating off multiple systems and in competing siloes, the front, middle and back office will all have access to a single source of truth. Not only does this centralized data approach help firms generate operational efficiencies, but it also means the information which asset managers are processing will be more accurate, thereby reducing risk.  

Firms with excellent data collection and aggregation processes are more likely to have better investment performance. By having accurate, real-time information on underlying portfolio assets and prospective investments, fund managers will be able to make better decisions. At a time when alpha is hard to come by, cutting edge data could give asset managers an invaluable USP. 

With institutional allocators becoming increasingly digital, the demand for real-time, easy-to-access reports has been growing.  

Robust data can enhance investor reporting too. With institutional allocators becoming increasingly digital, the demand for real-time, easy-to-access reports has been growing. A strong digital strategy can help managers shift from analogue PDF reporting to something more tech savvy, something which could help firms win mandates moving forward.   

Now more than ever 

The COVID-19 pandemic has made it vital that firms build in place an effective digital and data infrastructure. With the majority of the buy-side now working from home, manual processing is no longer physically possible in some instances. The pandemic and the disruption it is causing has reiterated how important it is for fund managers to have a forward-looking approach to data.   Through effective data management, investment firms will be able to net performance benefits, operational synergies while simultaneously improving the overall client experience.