Data: The Hottest Asset for Institutional Investors in 2022

Nicholas Barbone, Barney Bracher

Asset owners are at different stages on their data journeys; from a few with embedded enterprise-wide operating models generating significant insights and using advanced analytics; to those who operate with a more fragmented reliance on siloed data initiatives and lower level of in-house capability, to some that may not consider data a strategic priority.

Alpha FMC and Northern Trust recently hosted a cross-industry roundtable to discuss key data themes with a number of asset owners, Alpha Subject Matter Experts (SMEs) and Northern Trust’s experienced data solutions team:

The following themes emerged from the roundtable discussions as particularly pertinent today:

Data is a Key Enabler

Data is driving every business decision and harnessing it is crucial for asset owners in ways it never has before. With that there comes a risk of being left behind if action is not taken. That applies to asset owners with investment functions in-house, hybrid or outsourced.

Quantity ≠ Quality

Data comes from a multiplicity of sources and rationalising them is a challenge. An effective data management framework needs to account for the introduction of external datasets to augment internal data – enabling effective and targeted activity to be actioned based on a holistic data driven picture.

However, quantity does not equal quality. Data is going to come from many places, but more data is not always better. Internal and external data must be effectively managed so that the accuracy of that data can be relied upon. Identifying the scope of data required to drive better processes and decisions is challenging. Being clear on priorities is key.

Data is “Complex”

For asset owners, data presents different levels of complexity than it does for asset managers. Asset owners are generally dealing with a scale of liquid to illiquid investments, and the associated range of data requirements. Asset owners are also looking at their investments on several time horizons, and the data consumption and need for data quality and timeliness is different between the short and long term.

Asset owners may not need the tools that asset managers use to manage daily trading and net asset values (NAVs), but also can’t maximise their portfolio decisions with data tools that support only long-term forecasting. All of these factors amplify the need for asset owners to take action to identify and address unique requirements.

Data at the Centre

There can sometimes be a disconnect within asset owner organisations between technology and data. Some feel that by simply implementing a new technology, data needs will be met.

According to Barb O’Malley, Head of Client Technology Solutions at Northern Trust, “While good technology can support embedded business processes, an effective data management framework must underpin this, allowing easy capture, storage and management of data. It is important that a rich dataset is constructed and constantly developed to form a basis for future insights.”

Developing and maintaining a data management program helps deliver true value from investment in wider technology systems. Providing users and decision makers with the tools to aggregate, view and model data to draw insights is key.

Data is “Expensive”

Our roundtable participants most commonly perceived data as ‘expensive’. However, they may be overlooking the cost of ineffective data.

According to Jon Benson, Pensions Lead, Alpha FMC, “We have observed that some clients don’t believe that investment in data is as impactful as investment made elsewhere in their organisations and can therefore be deprioritised. Where this mindset prevails, we find that organisations often underestimate the cost they incur through wasted and additional human effort attempting to master and interpret their information.”

Upfront investment in establishing good data foundations, availability and governance can be daunting, but by looking holistically at the true cost of data, it can be seen as a valuable multi-year investment.

Manage the Data

Data needs to be constantly monitored to remain accurate and reliable. A dedicated team should be accountable for assuring the on-going quality of data. Going even further, a culture of accountability for the completeness and accuracy of each individual’s and each team’s own data should be engendered throughout the organisation. Concurrently, instilling best practice ways of working between business teams and supporting data and technology teams will help ensure that the correct mechanisms and communication lines are in place to both aid the capture of new data and the remediation of existing data inaccuracies.

According to Nick Barbone, Asset Owner Practice Leader at Alpha FMC, “We have seen some clients struggle to build an infrastructure in-house. They have found it challenging to implement data governance without proliferating controls to the nth degree; to effectively reduce manual checks; and to stand up an operating model to swiftly resolve issues. Those clients recognise that outsourcing is their best option, because they can rely on their outsourced provider to manage these tasks, freeing up their time to focus on what they do best.”

Where to Start:

Asset owners may feel they do not have the bandwidth, size, scale, capability or budget to talk about data immediately. According to O’Malley, when Northern Trust works with clients to develop solutions to their data challenges, they ask them to focus on a number of factors to enable longer term success:

  • Clearly define their data outcomes and enablers
  • Drive towards specific goals and targets
  • Start small whilst embedding a foundation for larger scale ambitions

An organisation’s strategic objectives must be defined as they will shape the approach.

When asset owners make the decision to outsource their data management, they should seek providers with fully comprehensive capabilities. Northern Trust’s product, Data Warehouse Solutions (DWS), supports the end-to-end management of data from Northern Trust, their own client data and third-party sources to a client-specific data warehouse.

Leveraging Snowflake technology, DWS is fully Application Programming Interface (API) enabled, custodian agnostic, public cloud enabled, whilst surrounded by a service and governance layer from Northern Trust. Clients then have the flexibility to normalise and standardise that data to deliver quality, comprehensive, fit-for-purpose information to consumers in multiple easy to use channels.

To discuss any of the content in this article further, please contact Nick Barbone

About the Authors

Nicholas Barbone
Associate Director

Nick has over a decade of consulting experience and has built a reputation for the leadership of large-scale transformational change programmes globally across the asset & wealth management industry. Within Alpha, one of Nick’s responsibilities is leadership of Alpha’s Asset Owner Practice, and he has significant experience advising a wide range of Asset Owner clients.

Barney Bracher
Manager

Barney has over 7 years consulting experience, working with leading Asset Owners and Asset Managers to deliver an extensive suite of data and technology focused change to a global client base, primarily with Alpha's Distribution and Investments Practices. His experience covers a range of topics from strategy to execution, more recently focused on data and technology architecture, process optimisation, operating model design, and client reporting.