The role of data and technology in the investment management industry is evolving at a rapid pace. How should firms leverage the power of innovation in such a fast-moving environment?
The industry is determined to harness the innovation potential of data and analytics, to create new value and secure competitive advantage. However, every firm faces a common challenge: The pace of change, both of technology and regulation, is rapid and relentless.
At the recent Investment Data & Technology Summit in Sydney, we explored this challenge with fellow industry leaders and discussed our vision for data and technology innovation, along with possible routes to navigate this journey.
Peter Sherriff
Director of Product Strategy, APAC
Charles River Development
Aspiring to a common goal: The need for operating model simplicity
Investment management firms in APAC are ambitious: They are targeting growth, efficiencies of scale, and an expanded international footprint. Above all, they are focused on improving outcomes for their investors. Achieving those goals requires a unified front-office system and a centralized data platform that is underpinned by trusted data and enriched by robust third-party analytics tools.
In practice, this means an increasing number of partnerships between investment firms and a select few strategic service providers, with software-as-a-service (SaaS) playing a significant role as part of a broader migration to the cloud.
This is not to suggest that outsourcing provides all the answers. Instead, think of smartsourcing – an approach that strikes, on an ongoing basis, the optimal balance between internal and outsourced capabilities designed to suit your firm. One approach to smartsourcing could be to leverage outsourced services while implementing a core system and growing internal capabilities to differentiate over time, using a balance of approaches to evolve efficiently while mitigating the risk of technical debt.
There was widespread agreement between conference delegates that culture is a fundamental part of effectively managing operating model transformation. Change management, enabled by dedicated and responsive change managers overseeing the process, helps businesses embrace transformation.
Towards the next generation of platforms: Balancing value with complexity
What does a next-generation platform look like? The practical approach to pursue an all-in-one model combined with additional best-of-breed functionalities was top of mind for delegates.
For example, if we consider superannuation funds, there has been a significant movement within the industry towards internalization of asset management teams in recent years. This requires a large-scale adjustment and a major rethink of how teams are aligned, and which platforms they use for risk management, portfolio construction and trading. SaaS tools offer much to enable this shift, but their value has to be balanced carefully against the potential complexity and cost to the business.
Considerations include the availability of customer support and servicing locations – particularly for the most critical applications. The reality is that flexible platforms built on SaaS tools may not be as “hands-off” as initially anticipated.
Involving the IT team early in the change process is essential. The IT team can offer a perspective on limitations stemming from the business’s infrastructure – and gain useful insight from the discussion around business value.
Actionable insight is what matters – and data is key
Investment firms are looking for reliable insights on which they can act. However, these aren’t attainable without a high-quality data set that allows users to “connect the dots.”
This makes it imperative for firms to focus on getting the core data right before anything else. That foundation also has to be flexible and scalable: think in terms of being able to understand and verify the data through end-to-end traceability and well disciplined data cataloguing, irrespective of the domain.
The importance of good data governance cannot be overstated, starting with the mindset that data is a critical asset. Discipline maintained throughout product and project lifecycles is required.
Against this backdrop, the panellists highlighted the importance of focusing on five key pillars: Accuracy, accessibility, efficiency, robustness and security. The entire data operation depends on these key pillars.
A common challenge lies in Enriching private market data with internally generated data sets is a common challenge. Gaps in the data undermine trust, particularly as firms move towards a total portfolio view. Acceptable data latency by role and/or team is another important consideration.
Be ready to flex
The target operating models of the future are living, constantly evolving organisms; the broader landscape is too complex and multi-dimensional to define a best-of-breed approach at a fixed moment in time. Agility and interoperability are non-negotiable.
Extending the operating model to accommodate new requirements for data remains a key challenge. For example, expanding the scope required to incorporate private markets data, often depends on outdated information.
Differing views of what really matters between investment managers and vendors can add complexity. In such cases, identifying what is required can be challenging. Delegates largely agreed that the industry needs to be flexible about how it solves problems, as technology and ambition will continue to change. Strategic partners who adapt to these changes will ultimately drive value.
Key takeaways for investment firms
In practical terms, firms need to recognize of the value of smartsourcing and develop operating models that enable:
- Autonomy and flexibility – A platform that fits your operating model, rather than requiring the model to shift
- Data transparency and control – Full ownership and end-to-end visibility of your data
- Scalability and growth – A solution underpinned by technology that evolves with and supports your growth ambitions
- Predictable costs – Tailored solutions that get you past the barrier of costly outsourcing solutions
- Access to expertise – Ongoing support from subject matter experts and cutting-edge technology built for the future.
The potential for innovation is huge and requires a transformation in technology as well as mindset. To succeed, firms must review their operational assumptions and think differently to adapt to the ever-changing landscape.
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The material presented is for informational purposes only. The views expressed in this material are the views of the author, and are subject to change based on market and other conditions and factors, moreover, they do not necessarily represent the official views of Charles River Development and/or State Street Corporation and its affiliates.