Midsize money managers are looking within for their data management, countering the broader trend of those firms outsourcing overall middle- and back-office functions.
Regulations stemming from the Dodd-Frank Wall Street Reform and Consumer Protection Act and Basel III are requiring money managers to keep a closer watch on their data, which can be anything from performance measurement to security categorization and compliance. Large bulge-bracket managers already have the capacity to handle these duties internally, sources said, but it's the midtier managers — those with $10 billion to $100 billion in assets under management — that face an issue of how and who should monitor that information.
“Firms are looking at what their high-value functions are, what they need to succeed,” said Marc Mallett, Naperville, Ill.-based vice president of product and manager services at SimCorp, an investment management software provider. “Having a good investment book of record, getting the best data they can for good investments, transparency for regulatory and client demands, that's why firms are moving” toward internalizing data management.
A SimCorp survey of 88 money managers released June 23 showed 53% aren't confident that investment performance figures they report are accurate, and 80% said portfolio managers do not receive investment performance numbers based on intraday position calculations. But 59% are able to determine trades, prices, foreign exchange rates and security classifications behind their portfolios' performance numbers. The managers surveyed had a combined $22.5 trillion in assets under management.
“We've found that getting at and managing the data is the root cause of investment inefficiency,” said Brent Beardsley, senior partner and managing director at The Boston Consulting Group, Chicago. “It means managers have to do a lot of reconciliation activity which is costly for them. Most managers are paying more attention to this. It's more of a capability and quality issue. (Data are) so embedded in what they do, they want to make sure it's done right and done quickly.”
Some midtier managers have created chief data officer positions, often senior level positions. “That's the governance piece. We've been seeing that role growing” in money management, said Paul McInnis, director of product strategy at data manager Eagle Investment Systems LLC, Wellesley, Mass. “Ten years ago, that position wasn't well-defined. Now there's a real centralized concern (at managers) on how data is managed. They realize that data is an asset, and are managing data accordingly.”