Over the past 18 months, superannuation funds and asset servicers have come to understand the importance of investment data management. Definitions as to what constitutes investment data management have varied and are frequently seen as being synonymous with reference data management. Significant effort and investment has been concentrated on reference data solutions but it is increasingly clear that it is far from being the whole story when we consider investment data management. The focus is shifting to managing and making sense out of operational data – position data, accounting data, performance analytics and risk analytics – to make more informed investment and business decisions, and deliver against regulatory and investor needs for transparency.
This paper is intended to give insight into some of the areas where we believe superannuation funds and asset servicers can extract true value from their investment data. Those firms that optimise their investment operations and recognise the value of the investment data they already have on hand, can realise benefits to their business over and above regulatory and institutional compliance that include:
• Better investment decision making for improved investment performance
• Improved automation and control across business processes to create operational efficiencies and reduce risk
• Launching new services and entering new markets to remain competitive
• Supporting new mandates, instruments and fund types to grow and retain clients
The 2013 regulatory landscape and its thirst for transparency has played a significant role in forcing superannuation funds and asset servicers to pay attention to their investment data and has heightened the requirement for accurate, timely and granular information. As the Government undertakes a financial system inquiry dubbed “son of Wallis”, regulation and transparency will continue to be hot topics in 2014 and cannot be ignored.
This is further supported by The Assistant Treasurer’s recently published discussion paper, “Better Regulation and governance, enhanced transparency and improved competition in Superannuation.” The aim of these initiatives is to seek feedback from the industry on aspects of regulation and transparency to ensure a stable and efficient financial system. In addition to helping improve and protect the industry, it aims to create a more transparent and informed market that best serves superannuation members’ and asset owners’ interests.
Alongside regulatory pressures, there is still very high demand for cost management post- GFC. The reasons are well documented, but as a result all participants in the investment management space are having to do more with less. Therefore, the streamlining of operations and automation of processes are key to ensure operations are lean and run optimally. Simply throwing people at the problem is an increasingly unaffordable luxury and so firms are now looking to organise and control their own data in a more automated fashion to reduce risk and create efficiencies.
In the light of these pressures, superannuation funds have begun to examine their operational objectives, strategy and technology. Complex regulatory changes such as APRA reporting and upcoming ‘Choice’ reporting requirements in July 2014, are creating additional urgency as more data than ever before must be sliced and diced. The smartest firms, we believe, are investing in investment data management technology to streamline their operations, automate and manage this complex mass of investment information.
Investment data management as a discipline has evolved from just a response to a heightened regulatory and risk environment; firms are also looking to leverage findings from investment data to launch new products and services, enter new geographies and expedite business growth. This move is echoed in the increased desire from firms to move from investment data management as a reconciliation and data cleansing exercise, to one that seeks to extract maximum value of data through the ability analyse the data forensically to support their business and strategic initiatives.
Knowing the Facts = Better Decision Making
The ability to produce accurate, relevant investment information in a consumable format at the right time for the right person is a major business challenge. A recent report that DST Global Solutions released in conjunction with Aite group found that 67% of wealth managers are experiencing challenges with aggregating investment data and 90 % have witnessed a significant uptick in data aggregation requirements. An automated investment data management solution helps firms to reduce costs and reduce risk through the reduction in manual processes and provides quick, accurate, timely data. Put simply, reporting and data are inextricably linked and investment data management and visualisation strategies should be tightly integrated.
Certainly there is evidence that organisations are looking at their data resources to improve their decision making. We see this outside of financial services where quantitative decision making is becoming the norm across unrelated business disciplines. Within investment management, there has been a marked focus in the last 18 months on data projects initiated for reasons other than tactical regulatory initiatives. This is reflected in one of the Aite report survey respondents noting “there is a growing need for analytics support as a result of the challenging business environment – the business wants more fact-based decision making.” In some organisations there are new roles being created such as “Chief Data Officer” given the strategic importance data plays in investment management today and into the future.
Alongside delivering competitive advantage through providing better data on which to make business and investment decisions, investment data management can also provide competitive differentiation through providing a better customer experience.
The increased demand for reports from customers - institutional and retail – has been a huge trend of recent years. The nature of the analytics and reporting is becoming more sophisticated as is the number of customer types demanding access to this type of reporting. Creating a strong investment data management strategy and culture can therefore assist firms with enhancing client communications through the support of ad hoc, specific updates – for example – supplementing the traditional monthly fact sheet.
Access to Analytics Intraday = Forensic Decision Making
There has always been emphasis placed on the need for access to “timely” data, but just how timely is now in the spotlight as pressures mount for investment management firms to have a better handle on their positions and P&L intraday. The growth in the use of the term IBOR (Investment Book of Record) is evidence of the recognition of a need for real-time information in a multi-asset 24/7 world. IBOR’s comprehensive positions and exposure management, combined with the opportunity for earlier identification of compliance issues will strengthen client servicing, regulatory reporting and reduce exposure to business and operational risk. Asset managers are increasingly demanding a single, comprehensive, timely and accurate view of their firm’s positions and the ability to look through to the exposure of different instruments to understand risk and communicate investment data to clients. This will be a true competitive differentiator for firms looking to better accommodate client demands for transparency and quicker investment decision making.
Investment data is flowing behind almost every decision, financial transaction and client communication – it’s already there, it’s everywhere. A data-driven strategic approach can deliver more value to a firm than just meeting regulatory reporting requirements. Forward thinking superannuation funds and asset servicers are recognising the value of investment data in its own right as a way to develop a competitive advantage and are already leveraging, harnessing and unleashing it. If properly exploited, the client and investment data that superannuation funds and asset servicers already have has the potential to transform their businesses.
Rhys joined DST Global Solutions in 1993 and holds the position of Head of Business Development, Australia and New Zealand. Octigan is based in Melbourne and has also worked globally in New Zealand, Japan, Indonesia, Hong Kong and the UK. Octigan has over 25 years of experience in the financial services industry, and has worked across a broad scope of areas including asset management, financial markets, business analytics and development and portfolio management for buy-side institutions, custodial banks and third party administrators.