On November 5, RIMES held an industry event for buy-side firms based in and around Los Angeles. Participants included Ross Tremblay, Senior Manager Asset Management at Accenture; Ben Webster, CEO of OWL Analytics; John Hoeppner, Head of US Stewardship & Sustainable Investments at Legal & General Investment Management America, and; Brett Schechterman, RIMES’ Head of Product for North America. This article is a summary of the topics discussed at the event.
Jacquie Desimone and Remy Steinfink, two of RIMES’ senior sales leaders in North America, kicked off the afternoon.
Jacquie opened: “throughout 2019, RIMES has hosted a series of events to bring thought leadership to our key client hubs. We’ve hosted events globally throughout Asia-Pacific, Europe, and North America. On the heels of a successful North American client conference in Boston, we have held forums on data management in key financial centers such as Chicago and Toronto, to bring some of the content to you, facilitate dialogue and client feedback, and of course, encourage networking opportunities amongst peers.”
Remy continued, “It’s been a really exciting time for us, with substantial growth as a business, and in particular in this region, where our client and partner base now includes the state’s largest asset owners, asset managers, and hedge funds. Each with their own unique approach and discipline around driving research and insight, but common to all of them is the need for accurate and well governed information to fuel that process. And all the better if it can be designed with technical innovation that’s sensitive to ever evolving business processes and systems, with a managed service layer around it. That’s why we’re here today.”
Building a data management strategy fit for the future
The next session covered one of the key headwinds facing asset managers in the US and beyond: while Assets Under Management is growing at a healthy rate, revenue is not. To address this challenge, asset managers are aiming to secure new revenue/growth opportunities and to proactively transform and scale their operating models.
Opportunities abound in both areas – from investing in new products, markets and business models to putting in place ‘smart’ data-driven operational systems, to leveraging digital disruption across the investment life-cycle functions. What all have in common is that they rely on data as the foundation.
It’s therefore unsurprising that data management tops the list of most important tech and operations initiatives at asset management firms. What does look set to change, however, is how firms facilitate these initiatives, with managed service providers and fintech partners likely to play a more important role in the future relative to in-house teams and projects.
Looking ahead, a dynamic data program will be a critical driver for competitive advantage. Firms that can transform and adapt to business needs across their operations will be best placed to succeed. This transformation will demand new operational data strategies, formal initiatives to evaluate fintech partners and the use of managed data software and services from specialist providers.
By evaluating and actioning upon creative approaches to operational data management, firms can allocate their resources towards higher value activities while providing for enhanced workforce skill set focus and development.
ESG investing and the associated investment process integration themes
The second of the day’s sessions focused on the rise of Environmental, Social and Governance (ESG) investing and the key data integration applications, challenges and best practices. While the market is still relatively modest, it’s growing rapidly and being driven by a range of factors, but largely due to global investor demand. ESG data can offer important insights into material risks and opportunities, and will therefore continue to evolve as an integral component of fundamental analysis and the investment decision framework.
Managers are competing to both innovate with new products and to integrate ESG screening into existing funds. Many will also utilize the platform to pursue a corporate engagement strategy on diversity and inclusion. So far this year, billions in existing assets have been remapped as ESG funds. As a result of this trend and the associated competitive forces, the market for ESG data and ratings will grow to a projected $745 million next year, an increase of almost 50% from 2018, according to research from Opimas, a capital markets consultancy.
There are a number of challenges with ESG integration. First and foremost, it’s important to understand exactly what the ESG data is intended to do: profile risk, identify alpha or drive environmental engagement and stewardship with corporates? Each requires its own approach to data analysis and impact output.
Another challenge facing firms is how to source and efficiently integrate ESG data into the decision process, especially given the lack of standardized metrics and aggregate ratings and rankings that are too broad or fragmented for consistently measuring impact. Score divergence is a particular problem, as a single security can be rated very differently according to the methodology used. This dispersion is a consequence of an over-reliance on self-reporting by businesses and the overall immaturity of the ESG market. When combined, these factors require ESG research providers must make subjective leaps to rate companies.
To overcome the challenge of score divergence, investment managers and asset owners have had to either subscribe to multiple sources of data to compare and contrast, or to simply choose one ESG provider and use them as the sole source of research and investment decision input. In some cases, firms have opted to make their own ESG scoring methodology, sourcing the requisite underlying data sets themselves and applying a rating or score through their analysts’ respective lenses.
While ESG may be an emerging domain, the basic concept of sourcing, validating and distributing high-quality data to different business functions remains key. Managed services in this space can help firms to deliver their ESG operational model foundation and vision at the rate of change that the industry is demanding. By having ESG data sets collated and mapped across their comprehensive investible issuer and securities universe, firms can take the broadest possible view when implementing their decisions.
RIMES Managed Data Services is a proven data operating platform that helps firms of all sizes and in all regions align their data consumption closely with business needs. Contact us to learn more.
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