Asset Management: Data management is top concern

Markus Ruetimann, chief operating officer at Schroders, expects a growing debate about data and the “acceptance of liabilities” over the next year.

“Our clients want us to cover everything. Whether we do things internally or outsource, that is not their concern – they want us to stand firm if something goes wrong and to cover any losses,” says Mr Ruetimann.

“If the outsourced NAV [net asset value] is wrong and this leads to a loss, our outsource provider would compensate us.

“But what happens when our distributors have another 20,000 unit holders? Where the buck stops is something I think we will hear more about next year.”

The comments come as a growing number of investment firms have outsourced a range of non-core functions, such as fund accounting and risk management, in order to shrink their fixed cost base and turn attention towards their main competencies.

According to figures from Beacon Consulting Group, 31 per cent of managers are reviewing their middle offices, while 36 per cent have reviewed them over the past year.

The result is managers now have to cope with multiple feeds of information – such as data on fund accounting, FX rates and benchmarks – being fed back into their businesses from those providers who manage these functions on their behalf.

Mr Ruetimann says the demand for information from both internal fund managers and clients has “quadrupled” over the past year. “Our clients and managers want information on demand – they want to access it faster and across different jurisdictions.

“A lot of that data is held by our third-party providers and sometimes they struggle with the quality and access to that data,” he says.

“What we have learned with our providers is that we need a clear definition of data flows and what information is hosted by us and our third parties.

“Inevitably, there can be some overlap.”

Dan Watkins, head of European operations at JPMorgan Asset Management, agrees the use of data has become a priority for the industry, particularly with regard to client reporting.

“When you outsource some of your non-core functions, there is a multiple amount of data that is taken back in from those providers.  “Our top priority is having best-in-class client reporting and performance analysis for our clients, and data plays a vital part in that,” says Mr Watkins.

With a heightened emphasis on industry transparency, managers are also under increased pressure to provide clients with detailed reports on procedures they have in place to manage risk, custody and other essential functions that have been outsourced to third parties. “You need to ensure that the quality of data to produce reports is as good as it can be,” says Mr Watkins.

“In conversations I have with people in the industry, more and more managers are turning their attention in this post-outsourced world towards client reporting – this is where managing that data layer comes in.”

The appetite for quality data was highlighted at an industry conference held by consultancy Investit in July. Asked what the highest priority was for managers, 82 per cent cited data management while client reporting was an important focus for 75 per cent.

Asset managers have identified data management as a top priority for operations in what they call a “post-outsourced” landscape.

Some fear that poor handling of information, including how managers aggregate data fed to them from third parties, could lead to disputes with outsource providers over who is responsible for potential losses.

Dave Francis, head of operations at Gartmore, also recognises the growing trend for improved data flows from third-party vendors. “The quality of data is fundamental,” says Mr Francis.

“We make sure that we have the appropriate performance indicators and service level agreements that give a guide to data integrity,” he says.

“There are monthly review schedules and we watch for signs or trends, and whether there is a need to address it or not. By looking at these indicators, it gives us a good idea of what is going on inside the vendor.”

Source: FT 08.11.2009 By David Ricketts

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