Given the cost and complexity of managing financial data sets in-house, many investment management firms now work with data management partners. Some are transactional relationships whereby financial data is passed through to the client with very little value-add. However, the best data management partnerships are strategic in that they free time and resources for firms to concentrate on their core business activities.
What makes a strategic data management partner? There are, broadly speaking, four key components that firms should seek out:
- Technology leadership. In a world where new technologies with the power to drive differentiation and competitive edge are emerging on an almost weekly basis, finding a partner with the right expertise and the right technology roadmap is vital.
- Data governance. As investment management firms look to launch new products and deliver for their clients, ensuring they manage risk and meet compliance objectives is every bit as important as speed. The right partner will help remove the headache of data governance, so firms can focus on their investment activities.
- Data expertise. More broadly, strategic partners need to do more than simply deliver data. They will have the ability to validate and quality assess the data before providing it in API- and feed-ready formats ready for use in operations. These partners are data experts and a valuable source of expertise for the investment firms that work with them.
- Global operating model. Finally, investment managers increasingly work on a global scale and need partners who can provide them with the right breadth of support. Strategic partners will be able to source data from anywhere in the world and provide on the ground support for investment firms’ regional offices in all major financial centers.
The hot topic of Environment, Social and Governance (ESG) factors provides a useful case study in just why such strategic partnerships are important.
As flagged in a new industry report, there’s a danger that as firms look to exploit the opportunities on offer through ESG funds, good data governance is being overlooked. The fact is that ESG data management is highly complicated as there is no standardization over what is measured, nor the way the information is presented. The danger is that a lack of robust data governance will mean that firms make the wrong investment decisions, leave themselves open to accusations of mis-selling, or issue inaccurate regulatory disclosures.
However, a partner with ESG expertise, global data networks and supporting data technology, can rapidly solve many of these governance challenges. Not only does partnering with a managed data service provider dramatically reduce the time it takes to achieve sound data management and governance systems compared to in-house approaches, it is also considerably less expensive.
The cost benefits of strategic partnerships should not be underestimated. As Spiros Alan Stathacopoulos, Director of International Distribution and Clients at Storebrand Asset Management, made clear in a recent blog on the subject of ESG: “Making a choice to develop an ESG policy is no longer a question. Making smart choices to keep costs low is key. Finding the right partners is a differentiator.”
Andrew Barnett, Global Head of Product Strategy at RIMES, reflects that: “the recent increase in interest in ESG is a timely reminder about the importance of the right partnerships when it comes to data management and governance. By working with data management specialists like RIMES, firms can free themselves of time-consuming data sourcing, validation and on-boarding tasks so they can concentrate on what they do best”.
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