Burgeoning Data Vexes Buy Side
Buy-side managers face an increasingly complex and difficult investment landscape, which demands more robust data management.
“There are a lot of factors driving this,” said Steve Cheng, global head of data management solutions at Rimes. “It is hard to get consistent long-term returns. Asset managers increasingly have to invest in new asset classes, new instrument types and new markets.”
“Due to the lack of returns, asset managers are also looking at managing costs. Any solution that could help optimize the data that they’re using can help manage a significant cost base,” Cheng continued. “The final driver is increased regulatory oversight. There are also a lot of regulations, primarily on banks, and asset managers tend to get caught in the crossfire.”
The explosion of numbers and information from an ever-expanding number of feeds and tapes in recent has spawned the era of ‘big data,’ which is commonly defined as a collection of data sets so large and complex that traditional data-processing applications are insufficient.
New York-based Rimes provides a service that allows asset managers to better manage their market data. “We take over the functions that would quite often be done internally within a firm in terms of doing the validations and corrections, and transforming, storing, and distributing the data,” said Cheng.
One area of focus for Rimes is managing security master data, a foundational data set that underlies all of a firm’s investment processes. This comprehensive approach trumps one-off solutions, Cheng indicated.
“Some firms have a series of short-term interim fixes and this tends to lead to ‘siloed’, duplicated data stores and duplicated operations which become inefficient and expensive, and also hard to control and manage,” Cheng said.
Other buy-side firms may adopt a sell-side data-management model, i.e. taking a heavyweight data-processing solution and implementing global enterprise data management tool like a data warehouse. However, such an approach may not work effectively or deliver promised savings because buy side and sell side data needs are very different, Cheng said.
“The sell side has a much larger universe — theoretically it can be almost anything that’s tradable,” Cheng said. “Even the largest asset manager has a much smaller, more focused universe.”
Security master data services can be most suitable for investment firms with some complexity in their holdings, perhaps across asset classes of geographic markets, Cheng said; the appeal isn’t necessarily correlated with the size of assets under management.