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Cost control and business complexities make buy-side firms question their strategies

The cost of doing business for buy-side firms in Asia Pacific has become a burden in recent years. With a growing number of complex asset classes, customer requirements and regulatory environments, these asset managers are looking for ways to remain competitive without absorbing high operating costs. According to a Waters Technology report, Tom Gooding, vice president of Asia sales at RIMES, commented at the recent Asia Pacific Financial Information Conference Panel that cost control has become a constant problem for buy-side asset management firms in Asia.

“We have a lot of conversations with clients about what they need, and about decommissioning what they are not using-understanding who is using what, and how much it costs,” Gooding explained. “One asset manager told us that for every dollar spent on licensing data, it spends $3 more internally on managing that data.”

“The cost of doing business for buy-side firms has become a burden.”

Complexities in doing business
One of the main reasons cost controls have become challenging for buy-side firms is due to the growing complexities involved in doing business. As a result of these increasing complexities, some buy-side firms are forced to pull out of certain investment options.

In fact, some buy-side firms are considering if there is value for them to stay in business in certain sectors due to cost excesses. The cost of regulatory compliance has made many firms examine the cost of trades for certain assets. These business and regulatory complexities create several more pressures on buy-side firms that constrain their abilities to serve their internal portfolios as well as those of their institutional clients.

The fact is that many buy-side firms do not focus on manufacturing and developing data. Therefore, they seek out managed data services and third-party vendors to support them. This alleviates some of the growing complexities in the short-term, but by not investing in these areas internally, they are not adding value to their bottom line for the long-term. This is where the need for data presents itself, because as some firms leave certain areas of doing business, data may drive the viability of innovative replacements for those assets. Buy-side firms want predictive, high-yield strategies that they simply cannot find among traditional benchmark providers. New data has driven these firms to begin looking to alternatives because they are getting a better idea of the impact they will have on portfolios.

Some buy-side firms are considering if there is value for them to stay in business in certain sectors due to cost excesses.

Bottom line for buy-side firms
Therefore, as more data will continue to become available, new opportunities will arise. This will also mean that new services will emerge that will enable firms to manage the aspects of their value chains that are not the core strengths of the business, such as regulations reporting, data management and creation and the use of alternatives assets. According to a Bobs Guide report by contributor Alessandro Ferrari, SVP Global Marketing for RIMES, this is where the value of data management solutions will become essential to the mitigate the costs and complexities of doing business. Data validation and remediation operations require significant time and resources which many buy-side firms simply cannot afford.

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