Business Case: Investment Data Highway for Asset Managers

Much of the middle-office operational infrastructure has grown up organically and is hard to maintain. It is also expensive and error prone.

With new asset classes, new vendors emerging, new sources of input data, new regulatory mandates, more stringent risk management & performance attribution, and more demanding client reporting, accurate and timely data is a clearly a critical success factor.

Enter the Investment Data Highway for Asset Managers

As we outlined in our earlier post, a successful solution is predicated on leveraging existing, pre-built assets with a fintech intelligent investment data highway. This delivers a reliable and scalable infrastructure to meet middle-office operational requirements.

• Data is accurate and timely for portfolio modeling, analytics, performance & attribution
• Operational processes help validate, reconcile, schedule delivery, and manage inevitable data breaks and investigations
• Investigations can be done in a timely and credible manner to gain the trust of key users (Portfolio Management, Risk Managers, Client Reporting etc.).
• Operational processes, which are intimate with the processing requirements of target systems are automated.

Yet, just centralizing data (from multiple data sources) in a data warehouse is not enough. It is critical to centralize and automate the operational processes that sit between the data stores and the target systems. A complete and scalable middle-office function is the purpose of an Intelligent Investment Data Highway for asset managers.

The Business Case: The 3 Drivers for an Investment Data Highway for Asset Managers

While the need for an intelligent investment data highway is evident, to ensure buy-in, it helps to clarify the business case for this and for automating asset management operations.

There are 3 drivers: 

1.    Financial

Reduce Internal IT Risks & Costs.

Purchasing capabilities from a vendor should bring the following benefits:

• Provision of a pre-built set of adaptors and operational logic for interfacing to source & target systems.
• Tracking of changes in target system releases and making necessary revisions on your behalf.
• Much lower costs versus in-house options because vendors mutualize your IT and operational processes (build once, sell to many).

Financial Costs

• Reduction of compliance breach penalties to unwind ill-informed trades executed using bad data and analytics.
• Reduction of opportunity losses as high quality and timely market information gets to the front-office on a more reliable, consistent and faster basis.
• Reduction and redeployment of key personnel from repetitive to analytical tasks. Money spent on expensive labor can be saved. Less time spent on re-processing and data break identification to more time spent on analytical understanding to inform key decision making.

2.    Operational

Reduced Operational Risks

• Business rules and data governance logic can pre-empt data breaks in previously manual processes.
• Automating forensic data management can discover and remediate breaks faster and more accurately should they occur.
• Much greater flexibility in switching to new target applications. As the intelligent investment highway maintains a ready set of adaptors and the logic for target system processing requirements, then moving from one system to the next does not require a whole new remediation of your operations and data management. Sometimes your firm may see a better alternative target system, sometimes an acquisition brings that about, and sometimes the search for alternatives is forced upon you by the market (e.g. POINT).
• Eliminating spreadsheet madness. Spreadsheets now used to reconcile data between sources and target systems are greatly reduced.
• Automation equals scalability. There is often much hidden middle and front-office manual overhead required for the portfolio management team to be able to trust their Portfolio Management System so they can manage their assets. Why? Because the operational and data management processes and support can be so complex and error prone. The intelligent investment data highway enforces a highly automated, comprehensive and disciplined process around data management rules and integration.

3.    Market

Better Portfolio Construction

• The market is more demanding then ever. Stricter regulations, increased expectations for detailed analytical client reporting and more active risk management scenario and exposure management requires clean and timely data.

The Business Case is Clear

An Investment Data Highway for Asset Managers offers a reliable and scalable infrastructure to meet middle-office operational requirements leveraging existing pre-built assets for the benefit of the Portfolio Management teams. Strong, automated data management and integration directly supports better informed and more timely asset management decision-making.

Learn more about IKINDI’s Investment Data Highway Solutions for asset managers.