06.15.2018

Data and Allocations Top Asset Management Concerns

During the annual Mindmeld buy-side forum held in April, the Indus Valley Partners communuity identified three major macro trends within the alternative asset management industry, according to company officials.

The annual forum was attended by some of the most notable CFOs, CTOs, CROs and CIOs within the alternative asset management industry and identified several key themes facing the buy side for the remainder of 2018 and years to come.

Among the trends the industry will need to navigate in 2018 and beyond include:

Alternative Realities: The data landscape has drastically changed over the past few years. No longer can firms ignore the realities and powerful potential of alternative data. The industry has left behind commoditized data sets for alternative data sets which now pose their own set of challenges. The next major hurdle for funds will be managing the new technology and data sets. Figuring out how to drive alpha from these new tools and ways to better structure your data will be paramount for success.

Chasing Shadows: Outsourcing has picked up significant traction. We are seeing an increased desire to outsource more and more post-trade activities to a combination of fund administrators, custodian banks and depositories. Fee compression from a more aggressive breed of investors stung by increased regulatory oversight and a higher-level of media scrutiny are all pushing funds to seriously consider outsourcing a variety of their post-trade activities.

Data Strategy: Complete mastery and integration of firm-wide data is key before alternative data sets can bubble up to the surface and become useful. Due to the influx of data many firms are now in need of specialized and centralized data services teams. Ensuring this team is positioned in front of the incoming data will enable the firm to better catalogue and sift through for maximum potential. The entire space continues to evolve quickly with funds rapidly adopting more quantitative approaches. More firms are shifting in this direction due to the increased use of alterative data while the traditional quant firms are slowly morphing into everything else beyond alterative data.

Expense Allocation: An investor’s top area of focus is becoming expense allocation, valuation and pricing. Pricing portfolio positions is an integral part of the end-of-month valuation process in order to calculate the NAV. Also, the process a fund takes on valuation is vital to not only the valuation of the portfolio, but also to the conviction and confidence that investors and counterparties have in a manager. One of the most important areas of focus for due diligence teams and consultants begins with a fund’s valuation process. A manager’s policies and procedures often undergo scrutiny and yet, many of the large and small fund houses still use manual spreadsheets and time-consuming testing to price their positions. These manual processes not only require a large amount of time from operations personnel but can also lead to incorrect pricing, which can cause investor strife and audit issues. The risks involved with a manual process are noticeably high and fund managers must now begin to look beyond static spreadsheets for ways to better automate and control their processes.

IVP strives to help buy-side firms harness the power of data, improving flexibility, scalability and efficiency so decision makers can generate insights, reduce risks, gain a competitive edge and find alpha. During the forum, IVP also unveiled and demonstrated a number of new and existing offerings that are incorporated across its full product suite, including IVP NAVigate, Expense Manager, Alt Data Analyzer and Party Master 2.0. These solutions enable managers to automate key controls, centralize expense allocation rules by fund, view a real-time sentiment score impacting stock prices and centralize all mastering key reference entities.

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