How new data systems can translate into better investments

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by Wietske Blees*

Asset managers and superfunds are making significant investments into data tools and infrastructure, but many are yet to see the results in terms of improved investment capabilities.

Bruce Russell, director at Shoreline, which helps investment managers build new data operating models, said most organisations were still focused on getting the data foundations right, including building “single source of truth” data platforms and tools that were supported by appropriate data governance arrangements.

While these foundations were necessary to ensure firms could efficiently process and manage information, in many cases, they were yet to actually translate into improved investment decision-making in the front office.

“The ‘white elephant’ risk that many investment managers face is that they have a fantastic database that’s capable of doing all sorts of things, but doesn’t actually meet a business need. While the focus has been on foundational activities, the missing link has been to connect these to the investment process, to make sure that investment teams are getting the right data at the right time,” he said.

Russell will be chairing a panel of hedge fund and data experts on combining data to improve investment decision-making at the 3rd Investment Data & Technology Summit in Sydney on August 14.  Information:

Enter investment data management (IDM) 2.0. “Once you have the foundations in place, IDM 2.0 is the next step. It’s about how you use the data to make better investment decisions. That is as much a change management challenge as it is a technical challenge, because it requires investment teams to change their investment processes,” he said.

“There is simply no point in providing investment teams with new data if they are not incorporating it into their processes to drive meaningful change.”

The front office teams were often relatively disinterested stakeholders that were reluctant to change their investment processes. However, he said, the responsibility to make these improvements lay as much with the front office as it did with the teams that were building the operational capabilities.

“You don’t want investment teams designing data management solutions because that’s not really their role, but they are the key consumers of that data and therefore should be involved in the process,” Russell said.

Carrot and stick

To enforce the necessary changes onto investment teams, Russell recommends a carrot-and-stick approach.

“The carrot is the objective, it’s building a new investment capability that should be attractive to investment teams, but often in the early days the benefits might not be immediately clear and you can’t just rely on these carrots. There has to be a stick and that is organisational pressure that can be achieved by linking KPI’s to the strategic objectives of improving data quality and complying with the new operating model,” he said.

For all the hard work that has gone into building foundations, if these connections were not made, investment data management might be remembered as the solution that never actually found its problem to solve.

*Wietske Blees is editor at Fund Business, an investment conference producer whose next conference is the Investment Data & Technology Summit.

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