Global custody firms are engaged in a data analytics “arms race,” with the battle likely to favor those that can give clients an edge in managing their investment portfolios, says Joseph L. “Jay” Hooley, chairman and CEO of Boston-based State Street Corp.
Success will go to “those that can extract insights on a real-time basis” from the trillions of dollars of assets they oversee globally, “to help inform client judgments about investment management, risk management and compliance,” Mr. Hooley said in a March 30 interview in Singapore.
The 30-year industry veteran said the decadeslong morphing of global custody from a transactional business to a data and analytics business has effectively “redefined the audience we're talking to: it used to be back office to back office, and now it's back office to front office, as the information inherent to what we do becomes more interesting to portfolio managers and risk managers.”
It's “redefining where the value is created in the value chain,” he added.
For industry heavyweights such as State Street and Bank of New York Mellon Investment Services, which oversee more than $29 trillion apiece in global custody assets, a precondition to making the most of that opportunity is gaining digital access to all data on the assets they oversee.
State Street's “Beacon” program — a 10-year, billion-dollar effort, more than half complete this year, to digitally interconnect all of the company's systems — will allow all of the company's global client data to be taken in digitally, pass “all the way through our system ... without human touch,” and create real-time data on the other side, said Mr. Hooley.
Francis J.G. Braeckevelt, a Singapore-based managing director and chief operating officer with BNY Mellon Investment Services, in a separate interview, said his globe-spanning firm has likewise made “great strides” in digitalizing everything it does, laying the foundation for designing and offering more powerful data analytics tools to meet client needs.
Every big custody player has figured out that “this is where the puck is going,” said Mr. Hooley.
The only question now is “who can execute,” helping clients sift through an avalanche of data to glean real-time insights that can guide their investment and risk management decisions, he said.
“Once you achieve that state” of seamless digitalization, “then for the information we hold on behalf of our clients, we're giving them real time data inputs ... overlaid by different analytic models — some of which we hope to provide — which will inform the future of investment management and, frankly, the business,” predicted Mr. Hooley.
It will be the “solutions you build on the back of that” digitalization that “differentiate you from the rest,” agreed Mr. Braeckevelt.
The BNY Mellon veteran pointed to the “Liquidity Plus” dashboard his firm began offering clients a few years back as one recent solution to meet the needs of clients, many of whom faced challenges during the global financial crisis in ensuring they had sufficient liquidity at “the right time, at the right place.” The product gives clients the ability to monitor and analyze their liquidity positions, allowing them to make shifts where needed in a cost-effective way, he said.