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Study finds Benchmark data to grow in both cost & complexity

According to a new study commissioned by RIMES Technologies and conducted by independent research firm Investit, the data management community is very aware of the costs involved in licensing data, but there is little consideration given to understanding the internal costs of managing and distributing it throughout the firm. Four out of five (85%) of the global investment management organizations polled felt the cost of buying index data was the biggest issue in data management, while 60% cited customized and blended benchmarks as important. All of the managers expect data license costs to increase, and just over a third expect them to increase significantly.

To manage strategies effectively, portfolio managers need access to an ever increasing range of complex market data. Looking specifically at costs – with the three main types of costs being licensing, staffing and technology – nearly all (93%) consider index data licenses to be the highest, while 60% ranked technology as a low cost concern. Consequently, the focus tends to revolve on the highly visible cost of data licenses, rather than on the more hidden expenses of resource and technology as only one in five expected increases in costs for internal resources and technology. As a result, too many managers fail to fully appreciate the time/cost effect of internal factors; issues which are, paradoxically, under their direct control.

Complexity will be a key factor in driving demand for index and benchmark data, as nearly three out of four (72%) indicated they expect to see an increase in their usage in the coming year. Blended benchmarks will also contribute to growth as seven out of ten respondents anticipate additional demand for indices from emerging market exchanges and specialist vendors.

“There is an interesting paradox in the report,” said Steve Cheng, Global Head of Data Management Solutions at RIMES Technologies. “While there was a clear indication that asset managers expect an increase in the use of index data and benchmarks, and an increase in complexity with the growth in blended benchmarks, only around a fifth of the firms expected an increase in the costs for internal resources and technology. Asset management organizations will have to address the problem of managing this growth within existing budgets.”

According to the study, managers who use a specialist market data provider as the main source of index data are much more likely to state that their operating platforms provide strong support for key aspects of index data and benchmark management in areas such as data reliability and processing incoming data without manual intervention.

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