The digital and data revolution provides the buy-side with significant opportunity, stated participants in the recent TSAM Europe conference. Many industry firms may have a hard time seeing this point of view, as they might be too preoccupied with the challenges presented by data management to realize its potential for innovation.
Rising regulatory scrutiny
During the conference, panelists from the European Fund and Asset Management Association, The Investment Association and the Financial Conduct Authority all noted that going forward, regulators will be evaluating whether the costs associated with asset management have adequate transparency, according to Berlinguer.com.
In addition, these supervisors will be assessing if buy-side firms are putting the proper due diligence toward risk management, the media outlet reported. Given this situation, the panelists offered differing views on how the strategy of asset managers will change going forward.
Data management challenges
Currently, many industry participants are very much aware of the inevitable challenges that come along with their data and the technologies they use to manage this information. For example, asset managers leverage benchmark data to evaluate their performance, and the costs associated with harnessing this particular resource have been rising over time.
In addition, client needs have been evolving, and they have been demanding that buy-side firms use not only a wider range of benchmarks, but also benchmarks that have been customized. Industry firms are also facing challenges associated with both effectively managing immense amounts of information and also making this data transparent to regulators in order to comply with existing requirements.
While the aforementioned tasks may prove challenging for buy-side firms, the situation may present institutions with the opportunity to grow stronger. In the rapidly changing environment, asset managers may have to focus more on producing returns to turn a profit instead of relying on management fees, according to Berlinguer.com.
“Asset managers may have to focus more on producing returns.”
In addition, buy-side firms that have already established themselves might benefit from the greater need for digital and data technology, as the costs associated with having the required resources could make it more difficult for newer competitors to enter the market, the media outlet reported. Once institutions have upgraded their technology, these resources will combine with the internet and electronic platforms to make it easier for them to sell their expertise to the broader markets.
“Data can be helpful and useful, as there are things that it can provide to help determine where we may want to spend our resources,” stated William Amos, who works for FCA as director, Wholesale Banking and Investment Management.