FundTech – Regulatory reporting has traditionally been the biggest driver for improving data management, but are other factors becoming more prominent, say the search for alpha, risk management or product development?
Keefe – Regulatory reporting is not going to let up any time soon, so that’s always going to be there. What we’ve learned over the previous four or five years is that the only way to deal with that is to make the regulator a core part of your data infrastructure, to treat them as another consumer of your data just like investors and asset managers, making sure that they are built into your data model, so that you can make it easy as and when they change regulatory requirements.
That said, on the question of search for alpha and everything we’ve just said about the pandemic, there’s been a realisation that operational processes haven’t been as refined as they could have been and there is a focus on how to take that further as an industry. It is more and more difficult to differentiate your product from another asset manager, so you have to look for other angles and data is a key part of that. Access to key data is certainly a focus that we’re seeing from clients.
FundTech – The ability to use regulatory reporting data for something else as well has always been the nirvana. Are you seeing that becoming more prominent or is it still just an aspiration?
Keefe – Absolutely, we’re seeing it becoming more prominent. Regulation and the data required have driven the need for decent data architecture and strategy. And now we’re being forced as an industry to look at where we can get more alpha. Because we’ve already got the constructs there and that architecture there, clients are requesting the data to enable that search for alpha. Even something like tokenisation essentially revolves around data and getting the structure in place to enable that. It is about getting to a point where you can utilise the data to enable a better model for the end investor. That’s where this is headed, and pretty quickly.
Clarkson – I’ve got a slightly different view about the data management piece from a regulatory perspective. Regulators want data for transparency and protection of the end investor in effect, and that’s to protect the data itself and also to make sure the end investor understands the data they’ve been presented with. But we work in a global industry with multiple different regulators leveraging multiple different legacy systems across the markets, so do we get improving data management, or do we get more complexity in our data? If you have a solution that can provide better data management, will it actually drive better management or will it be hampered by the ongoing reluctance to accept that the regulator should be a partner and consumer of that core information that you hold?
Peacham – Regulatory reporting and the methods used to produce it certainly drive the requirements for improved data quality and checks. For example, at Amundi, we do tripartite template (TPT) reporting for clients and have traditionally outsourced some of that, which means we have to check the quality of that reporting against our own. We found that to be an onerous process, so we took it back in-house. It is a big factor for client retention, and if they are better assured that the TPT reporting is done at a high quality, it reduces their potential exposure to the regulator and it’s a massive sell for the company.
Clarkson – We are moving to an experience economy, so if the investors are going to get that better experience through that service, that is going to be a plus. As a data-driven service as well, it’s going to be very helpful, so looking at those analytical and presentation tools will be very beneficial.
Peacham – It is painful for clients to actually do this kind of reporting. It ticks the regulatory box, so to have that done for you as part of the service rather than having to source that data through an API from your service provider to your own reporting and then have to do that analysis cuts a lot of the cost and takes away a lot of the pain and allows them to focus on the investments. Amundi considers a client-centric approach as a key asset in a service offering.
Roche – Regulations are still one of the main drivers for data management because it does affect every organisation. But having a greater understanding of customers and their needs and having the ability to target them more effectively by adapting the products, the services or the business model, that’s also an important driver.
FundTech – Has there been much progress on standardising ESG data or when a new asset class comes up, is data still the biggest inhibiter to its development?
Clarkson – If it’s a new market or it’s a new product, there’s always going to be a data shortage because it’s inherently new. ESG has been around for a long time and it should be better by now, there should be a more standardised approach to ESG because the world is moving into a more sustainable model and wants that clarity, yet we still see issues cropping up.
Peacham – There is still a bit of confusion in the market because one product may have two different ratings depending on the rating company and its rating methodology. The faith in ESG ratings needs to be more solidified with clients, so when they look at a factsheet or extended factsheet for ESG, they understand what the product is saying about its ESG rating. Like any new dataset, the regulators need time to get their heads around it. But just like we have regulation around other reporting processes, like Priips or MiFID II, there should be a regulation on ESG standards as well.
Keefe – If we’ve learned anything from MiFID II and Priips, we know that standardisation is difficult to obtain across the funds industry. We end up with different bodies trying to drive standards, and those bodies end up diverging as well, you end up back in the same place, so how do we get everyone together? Logically, data could play a part in that because if you can see and certify the underlying assets held within a fund centrally, it would make it more simple than having the onus on the asset manager to certify the fund.