June 2013

INSIDE VIEW: Nothing is certain but death, taxes and data

ScreensThere are roles in data management that did not exist in 2007, says Dave Reynolds at Investit, and this reflects a growing recognition that there needs to be significant investment in the function. Thanks to smarter technology, data is growing in volume on a daily basis. To illustrate the point, more than 72 hours of YouTube videos are uploaded every minute and 145 billion emails are sent every day.   Market research firm IDC predicts that the digital universe will grow from 2.75 zettabytes in 2012 to 8 zettabytes by 2015. In case you were unaware, a zettabyte is a million terabytes or one sextillion bytes. This intangible raw material has become an inescapable part of our future as businesses across industries are capturing and using data to become commercially “smarter”. In the funds industry, data is crucial to investment decisions. As business optimism is increasing, firms have a renewed level of confidence in the future and are now moving from focusing on “keeping the lights on” to defining how they can compete more effectively in the future. As a result, firms are starting to grapple with how to turn data into competitive edge and realise that a robust information strategy can make significant contributions to their aspirations. At Investit, we have tracked the industry’s journey to “data management maturity” since 2001 through our research, benchmarking and consulting projects. At the moment, we liken current industry data management maturity to a spotty teenager; it is now established with the occasional growth spurt but improvement is needed. Roles in data management that did not exist when we surveyed firms in 2007 are now established, reflecting the growing recognition that there needs to be significant investment in the function. There are also some major data management enterprise programmes in place. Technology has improved, though some firms have acquired a legacy that will be difficult to remove. The majority of firms have defined their data management capability, but it has been a slow process for the industry to get to this level, beginning a decade ago when financial services firms recognised the importance of data. They then spent the following decade understanding how to cope with the growing volume and complexity, and implementing technologies to provide the capability. Now the industry is starting to focus on how to combine data to create more insightful information so investment managers can be more proactive as a result.We predict that this will be another long-term journey for many firms. The transition from gathering data to building knowledge is not helped by trying to manage a seemingly infinite challenge with finite resources. At the same time as the explosion in data volume and complexity, operations teams are under pressure to provide improved business intelligence, with more self-service capabilities and seamless transitions between mobile, web, voice, written and face-to-face access – not only for internal staff but also for external clients. Additionally, the new and diverse types of data formats such as video and unstructured text complicate information movement between teams. The volumes and types of information also cause scalability issues which many systems and information architectures were never designed to manage. Developing a comprehensive information strategy that copes with these realities is daunting. Even with the latest technologies, firms struggle to define information programmes that keep pace with user needs and expectations. Resourcing is another key challenge as many are finding that they need a variety of skills in the data management team, from technical to sales and account management skills. Once firms understand the staff profiles needed in a data management team, they will then need to decide how to attract and train the appropriate resources. Most firms now distinguish between managing the information content (a business responsibility) and managing the technical environment (the responsibility of the IT department), and there is a growing recognition that information forms part of the overall operational infrastructure of the firm. What many firms struggle with is how to build and implement an effective enterprise-wide approach to information management that bridges processes across departments. Despite evidence of improvement, we see data management still handled at a programme level and many firms focus on implementing operational and technical solutions without establishing a strong governance structure first. Data governance means the system of sponsorship, controls, checks and balances required to ensure that the objectives for effective data management are delivered and the principles complied with.
Our experience is that the firms with good data governance have made that leap from gathering data to building knowledge, which has raised their operations above the competition. Without a strong governance structure, many information strategies often fail. Frequently those failures are the result of having the wrong person sponsoring and leading the strategy, or are a result of higher priority projects (such as regulatory change), lack of executive and business unit engagement, and a lack of compelling business case at the start. Creating a smart company that exploits its information assets requires strong executive support to communicate the importance of the information strategy to the rest of the firm. This includes clear communication of the drivers, the measurable benefits and a defined roadmap of priorities to move forward. This will help firms to overcome a key hurdle; that people outside of the data management function do not understand why data should be managed and need educating about its value. Unfortunately, the data management function is often not empowered enough within the firm to effectively bring about change and there is little senior management buy-in. Many firms have run the data management programme but forgotten to keep selling the vision to management – getting the go-ahead to run the programme was only the start of the sales process. In the future, fund management firms will have to advance data to a higher priority so that it is seen as important as portfolio management and performance. Those firms willing to make the investment and commitment will benefit from easier compliance with regulation and mitigate risk. Firms will also better understand the opportunities to develop stronger products that meet client needs, which are run more effectively because they know where and how to allocate finite resources. Dave Reynolds is a principal consultant at Investit ©2013 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.