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The RIMES Forum – Singapore

Managed data services provider RIMES recently held its first industry round table in Singapore. Several representatives of buy-side firms attended the round table, including staff working in risk and performance.

Participants discussed the various index & benchmark data challenges they are encountering. Many elaborated on the costs involved in managing this information, including the expenses associated with data vendors and labor.

Buy-side representatives talked about matters like manually collecting data, and noted the specific challenges associated with this activity.

In addition, participants discussed the various business units in their organizations that leverage benchmark data, and what specific needs these units have. They talked about how the front-office, middle-office and back-office departments use this information, as well as the varying concerns that these sections have.

Certain respondents voiced the difficulties they are having around centralizing data or spreading it out, as well as the implications of these two options. Another key facet of corporate strategy that was covered at the Singapore round table was whether companies opt to focus on data governance or processing.

RIMES has contributed to the creation of various reports that cover key challenges such as the ones described above. During the round table, the managed data services provider went over several documents and asked participants to give their input on the findings.

The company started out by citing some figures provided in Investit’s 2011 report, “The management of index data and benchmarks in investment management firms.” Of the firms that took part in a survey conducted for this document, 85 percent said that buying data from outside vendors is an issue.

The round table moderator spoke to this, and noted that manually collecting this information is also expensive. He asked the attendants to comment on their experience with gathering and managing data.

One person, who is responsible for Business Change IT at an Asian investment manager, said that whether or not these activities are a major issue can change quickly.

“I think that it would depend on when you ask the question, since it is such an evolving space,” he said. “A company might not have problems with this matter now, but the answer could be completely different in six months.” The director of Business Change IT also spoke to some minor challenges that he has faced repeatedly.

The buy-side representative spoke to the front office’s periodic benchmark data needs, saying that “there are always going to be some slight differences” that will require explanation.

“For me, it’s largely a matter of ensuring that everyone knows about these slight differences and why they exist,” he said. “It’s a matter of continuous education when you are working in the front office … and a matter of how many times you explain the situation.”

Another participant, who is responsible for risk and performance, also emphasized that timing is crucial.

“From a front-office perspective, the interesting thing is that you have this huge concentration around volumes of data on a daily basis,” he said. “They have to be exact and they focus on the front-office perspective,” he noted. However, the market participant emphasized that the situation changes entirely once crunch-time begins.

“When you get to month-end, it’s a different story. At that point, people only care about whether the benchmark data is there. He said that a lot of benchmark related questions are being raised after-the-fact,” the person stated.

The buy-side participant noted that company staff members have differing priorities, depending on what they do for the organization.

“If you are truly looking at things from a performance perspective, you are looking at earnings per share estimates and direction data,” he said. “This metric has to be calculated on a daily basis – almost real-time.”

After participants gave their two cents on this crucial matter, they had the opportunity to weigh in on the difficulties they encounter due to front- and middle-offices having different needs.

One individual, who works on the System & Data Management Team of an asset management firm, commented on the challenges his company is facing in its efforts to centralize key information.

“I guess the centralizing of the data is a challenge,” he said. “That is what we are embarking on, a project involving centralization and direct data management project. We are looking to synchronize the data between the front office, middle office and back office. That data is very particular.”

An attendee chimed in, saying that a centralized validation team is quite helpful, but that this resource doesn’t do much good without effective validators. He emphasized that if these validators don’t know what the information is being used for, having a centralized team will not be very helpful. The buy-side representative used the example of a Sydney-based office he worked in previously.

“At one of the offices I used to work at, the data was by default, managed by the performance team,” the person said. “That was interesting for us since we are a performance team, not a data team. For us, that was interesting, but it was like we need to go and talk to all the stakeholders and see what we are using this for. While some business units were not particularly concerned with the data being validated, others thought this to be absolutely crucial.”

Working toward data management best practices

After taking some time to discuss how firms can balance pursuing various objectives – including speed, licensing requirements, agility and governance – in their data management efforts, the presentation moved on to an Investit report.

This document, released in February 2012, was called “Benchmark Data Management – the Road to Best Practice.” It sought to give market participants guidance on how they could set up an optimal framework for managing their key information.

For this piece, firms had the opportunity to rate their performance both in terms of data governance and also processing. The majority of respondents thought themselves strong on the processing side, but weak in terms of governance.

At the round table, participants got to check in and give some insight into where they are at with this key matter. The moderator asked the individuals taking part in the forum if their firm is stronger in terms of data governance. He also asked if governance is a buzzword in the region.

One participant weighed in, noting the importance of data ownership.

“I think what he’s talking about is who the person responsible for data is,” the individual said. “This person can help determine whether the information is accurate or not. It is about finding the right person to talk about this data and whether it is right or wrong. From a collection and governance point of view, we need to make sure we hear it from the right party.”

“Business owner to take responsibility for the data is very difficult, so you need to have a strong sponsor to make sure this is in place,” the market expert added.

The link between data use and labor costs

Another key report covered during the round table was a Deloitte document that contained research on how using information creates labor requirements. This document, which was titled “Benchmark/Index data management and related costs,” and released in January 2013, found that for every 10 pieces of data a buy-side firm obtains, it needs three full-time equivalents.

The moderator asked respondents whether they feel this metric is accurate.

A person who works on the performance team of an Asian investment manager said that such a correlation may exist. The individual noted that the more benchmarks his firm has, the more they have to do. He said that the responsibilities associated with different benchmarks can vary. In addition, his investment manager may have to expend greater labor resources if it has a large number of requests for new benchmarks.

 

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