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Index Proliferation Leaves Investment Managers Struggling to Cope

In an age preoccupied by short-term earnings, where highly vocal activist investors have gained enormous sway, the rollout of a new index that focuses on companies’ ability to generate long-term value was sure to grab headlines.

The S&P Long-Term Value Creation Global Index was launched at the World Economic Forum in Davos in January. It was developed by S&P Dow Jones Indices in collaboration with the Canada Pension Plan Investment Board (CPPIB), and is backed by some of the world’s largest and most prominent institutional investors. The goal, according to the investor group, is to show that companies that adopt a long-term approach are more likely to maintain a competitive advantage and thereby sustain stakeholder value.

Index overwhelm

The index’s goals may be something new. But its launch is yet another example of the proliferation taking place in the industry, as data vendors publish ever more, and more esoteric, indices.

For investment management firms – which must now source, manage and store mushrooming volumes of increasingly complex index data and benchmarks – this presents major challenges to:

  • Quickly and efficiently add relevant indices.
  • Deploy the specialist knowledge to ensure the indices and benchmarks are correct and appropriately managed (especially given the lack of standards and best practices for managing data).
  • Script them to work with a host of third-party solutions.
  • Ensure efficient distribution to the diverse range of functions that use the data within an enterprise.
  • Monitor data licensing terms, which can vary greatly between index vendors and across jurisdictions.
  • Decommission indices and benchmarks when no longer needed to minimize costs and maintain good data governance.

Power of partnership

Effective data management has become increasingly imperative. Few, if any, investment managers would claim it is a core competency though.

It makes economic and strategic sense then to partner with a professional managed data service provider that has the necessary data collection, validation, transformation, storage and distribution expertise. This can lead to:

  • Reduced total cost of ownership through savings on legacy vendor fees, data delivery efficiency and productivity gains.
  • Improved index vendor management.
  • Tighter cost management through a closer alignment between data consumption and business usage.
  • Improved service levels for business functions across the organization.
  • Greater responsiveness to new business opportunities thanks to the ability to quickly and easily add relevant benchmarks as required.

Index proliferation and complexity only look set to increase. So why not ease the burden?

At RIMES we can help you measure the potential ROI for your organization of a Managed Data Service. Read more at www.rimes.com/forrester and www.rimes.com/what-we-do. For further information, please contact us.

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