Guest insight from Paul Ronan, Chief Technology Officer at FE fundinfo
The asset management industry stands at a critical juncture, buffeted by a perfect storm of challenges. As global markets oscillate and economic uncertainties loom, asset managers navigate an increasingly complex maze of regulatory demands, intensifying cost pressures, and relentless technological advancements. This dynamic environment forces firms to reevaluate their strategies and seek new avenues for growth and efficiency.
Amidst this tumultuous landscape, opportunity has emerged: the transformative power of data. Recent research by FE fundinfo has shed light on a pivotal shift within the industry. Asset managers, once primarily focused on traditional financial metrics and market analysis, now recognise data’s immense potential as a cornerstone for building more resilient, connected, and effective operations.
Data as a priority
Having accurate, timely, and comprehensive data can be transformative for asset managers. It empowers them to navigate a complex market, stay on top of regulatory demands with confidence and meet changing client demands. When managed effectively, data unlocks new use cases for firms to better understand investors, analyse performance, and develop strategies that drive reliable asset growth for clients. It is also the first step to tapping into more advanced technologies like artificial intelligence.
Asset managers increasingly view data as the foundation for building a more connected and effective operation. FE fundinfo research of senior asset managers revealed that the profession is turning to data to unlock new efficiencies and value in every corner of the business. Data management infrastructure topped the list of investment priorities, with 48% of asset managers planning significant investments in this area. The importance of data intelligence for effective decision-making is widely recognised, with 79% of respondents considering it extremely or very important. Furthermore, 88% agree that accurate and timely data is crucial for driving asset growth.
The ambition to be data-driven is dominant across the industry. But what do asset managers need to do to turn ambitions into reality?
The Value of Connectivity
Connectivity is a fundamental dilemma that asset management firms need to solve when rolling out data infrastructure. Many firms still struggle with antiquated approaches to data, relying on creating individual spreadsheet and csv files and sharing them manually across teams. This creates data siloes and opens the firm up to processing risks when sharing the data amongst different stakeholders. Further, one of the most persistent gaps in asset management is between the front, middle, and back offices. Legacy use of data leads to a lack of harmony in workflows across the business, creating damaging regulatory and documentation headaches.
Delivering this data harmony helps with fostering collaboration, automation, and efficiency across the profession. It allows firms to bridge gaps, remove data siloes, and integrate various systems seamlessly. This integration allows for the streamlined flow of information, enhancing operational efficiency and reducing manual effort.
Application Programming Interfaces (APIs) enable connectivity between disparate systems. APIs facilitate the exchange of data and functionality between software applications, enabling seamless communication and integration. Through API connectivity, organisations can leverage the capabilities of different systems, allowing them to work together harmoniously.
Connectivity sets organisations up to access live insights by harnessing the power of real-time data. The days of relying on individuals creating separate files, and sharing them manually, are gone. With robust connectivity infrastructure, organisations can gather, analyse, and utilise data from various sources in real time. This change empowers businesses to make informed decisions, identify trends, and respond swiftly to fluctuating market conditions.
Deeper connectivity allows for data transmission and communication processes to be automated. Through the seamless connections between systems, data can be transmitted automatically, eliminating manual intervention, and reducing the risk of errors.
Approaches to Data Infrastructure: The Golden Source
At a time of rising costs and high pressure on margins for asset managers, they can ill afford to be slowed down by duplicated and siloed data. Their strategy should have one clear end goal: creating a golden source of data.
Data should be validated, verified, and centralised in one location – not duplicated and disconnected. Delivering on this will require asset managers to clean their data, ensure its accuracy, smooth out any inconsistencies, and ensure that it is in a form ready for future processing.
Building this golden source of data is critical for all future transformation. For example, data intelligence relies on clean, accurate data to successfully analyse the data and produce insights that can be of value to the firm. Duplicated or outdated data will make this kind of analytics slow to achieve or entirely impossible to deliver.
Emerging use cases
Data holds immense potential for asset management. It opens the door to new technologies like artificial intelligence and machine learning that are well-placed to transform the profession, unlocking new value and efficiencies in a range of different areas.
With the availability of vast amounts of data, organisations can gain a deeper understanding of their operations, customers, and market trends. By leveraging data analytics and advanced technologies, businesses can uncover hidden patterns, identify opportunities, and make data-driven decisions to drive growth and innovation.
However, merely possessing data is the first step. To truly realise the value of the golden source of data, teams need clear ownership of the data. Organisations need the ability to understand and derive meaningful insights from it. This fact necessitates the development of data literacy and analytical capabilities across all levels of an organisation. By investing in data skills and empowering employees, organisations can unlock the full potential of their data assets, drive innovation and seize advantage from competitors.
Crucially, to be a truly data-driven organisation, data must be systematically available. This approach involves both technology solutions for data management, as well as frameworks, standards and mechanisms to govern its collection, organisation, and sharing. For asset managers, regulations on investor transparency give them an extra incentive to build a robust approach to the handling of data.
Building a golden source of data lays the groundwork for future use cases. AI relies on well-maintained, connected, and accurate data to run successfully. FE fundinfo research showed that it remains an area where asset managers are early in their journey: an area where 44% of asset managers remain stuck in early research mode. By leveraging the value of data, asset managers can accelerate their progress and start realising the value of AI. The rewards can be enormous. Potential use cases include streamlining back office admin like document creation and reporting, integration into risk and compliance process, and even using it to speed up the early stages of investment research.
Data is your most precious resource
Data is asset management’s great untapped resource. But if firms have the right tools and processes in place, they will realise their true value. Firms can drive efficiencies and foster innovation by investing in robust data management infrastructure, leaving them well-positioned to navigate the complex web of challenges facing the industry. The key to future success for firms lies in bridging the gap between raw data and actionable insights, empowering asset managers to make more informed decisions and secure a competitive edge.
We should not forget that the web of this activity extends beyond asset managers. The ultimate goal should be a more connected investment industry, with product manufacturer (i.e. asset manager) data trickling down to investors and financial advisers through various channels. The higher the quality data,
