In Tough Market Conditions Outsourcing Data Management Makes Even More Sense
May you live in interesting times’ goes the old Chinese curse; and if reports are to be believed, 2016 looks set to be exactly that for stock market investors. Fittingly, China’s markets are largely to blame.
Fears of a slowdown in the Chinese economy has spooked investors, with some reports suggesting stock markets could fall by up to 20%. Already the turmoil in China wiped $4.5 trillion off global equities in just five trading sessions – and we are only in the second week of the year. When added to concerns over the price of key commodities such as oil (on January 12th, the price of crude hit a new 12-year low), it is easy to see why some are predicting the worst market collapse since 2008.
One thing is obvious: if investment managers are to make the right investment decisions in this fast-changing market, then they need the right benchmark data, efficiently managed. But this is not without its challenges. Firstly, the sheer volume of benchmark and other reference data is increasing rapidly; investment managers today must look to source, manage and store data sets from hundreds of different providers spanning a wide variety of data processes; a time-consuming and costly task.
Secondly, the continuing trend for benchmark data customization adds further layers of complexity—and cost—to the data management challenge; yet it is essential if investment managers are to efficiently manage the data needed to make investment decisions, as required by their asset owner clients. To give you an idea of just how big a task this is: over half of the data we manage on behalf of our clients at RIMES has an element (or more) of customization.
The debate has raged for some time now over whether investment managers should take care of benchmark data management in-house or use an external managed data service, such as the one that RIMES offers. In healthy markets, the arguments for outsourcing are strong; delivering as it does more efficient and scalable solutions that help asset managers reduce cost.
In turbulent markets – like those we are currently experiencing – the case for outsourcing benchmark data management becomes even more compelling. After all, outsourcing frees asset managers from time-consuming data management tasks, allowing them to focus on their core role of increasing the value of their portfolios; and it ensures that new data requirements can be rapidly sourced and integrated, enabling greater responsiveness to new business opportunities. These benefits could well prove crucial in the year ahead.