First, while all buy-side firms have to reconcile their books and records to their custodians, custodian downloads only contain the basics that are used for client portfolio reporting, namely positions & transactions. This is good for a performance measurement only system, since aggregating transaction downloads saves a lot of work, rather than trying to go to each custodian directly or trying to gather transaction data from in-house systems for use in dashboards and client reports.

The problem arises in the data that is required to manage the investment process itself, namely portfolio analytics – It’s not typically provided by custodians. If it is, it’s only provided at a basic level and isn’t useful for pre-trade investment decisions since it’s not provided until the following day, at the earliest.

And this is where the data aggregation argument falls apart. Big data and the data management process itself has a much bigger role in the aggregation of data from sources other than the custodians, namely analytics and pricing services from various vendors. The challenge becomes getting access to this data. Custodial data aggregators can’t get it because the data is internal to the individual investment firm. From there, the challenge increases when trying to validate this data to make sure that it’s accurate before it’s used to make investment decisions or before it ends up on a client report. This is where data management technology comes into play and this technology has to come from other sources either internal or external, since the data aggregators only get data from custodians.

So in summary, data aggregation can help with big data in certain specialized areas but it’s not the be-all, end-all answer for the big data challenge. The answer is data management technology itself, whether it’s built in-house at a huge expense to the firm or provided by third party vendors.

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While much of the discussion around big data applies to the sell side, it also applies to the buy side. Take for example historical data. In the simplified world of the past before the heightened regulatory environment and the need to demonstrate transparency, the model used to be that portfolio management and accounting systems could overwrite the data and replace old data with new data without storing the previous values.

Fast forward to today – having the same business practice puts buy side firms at serious compliance risks for not storing the correct historical data in the event of an audit. Scarily enough, a number of today’s portfolio management and accounting systems do, in fact, still overwrite data and the most infamous of these are the legacy systems that we have discussed in previous blog posts.

Smart firms will leverage technology providers who integrate data management tools into their core applications to help them with this important industry issue and those providers who have already invested in data management technology are the best bets to keep buy side firms from running into compliance issues. At the same time, data management tools and technology will also help these same firms keep ahead of their competitors.

Share your thoughts on LinkedIn!

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What seems to separate the U.K. from their U.S. counterparts is that U.K. managers seem to understand the direct and linear connection between data management and being able to accommodate upcoming regulations. In the U.S., on the other hand, data management  is still sometimes seen as being somewhat abstract and largely a sell side concept.

Complying with new regulations is all about the data. Not only gathering it, but also being able to perform compliance checks with the assumption that the underlying data is accurate. This is a big assumption indeed. The only way to check for data accuracy is to employ data management technology, otherwise the task at hand is next to impossible given the reams of data which must be analyzed at least daily and often in real time.

How well do you agree? Tell us on LinkedIn!

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Data Management is at the heart of the investment management process and firms need to do all that they can to manage the reams of data that they process every day with the number one priority being accuracy.

What are some of the data management best practices you firm can employ? Share your knowledge and learn more on LinkedIn.

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Data Management is no longer a back office or technology initiative – we agree with that. In fact, our firm views data management tools as an integral functionality component within our system equal to any other functional area that we automate (i.e. trading/OMS, compliance, accounting, reporting, etc.) Having data management tools embedded into core applications eliminates the inefficient “overlay” approach, in which firms seek to create a data warehouse that contains data management tools. For most investment management firms, we have seen the data warehousing approach to be a challenge to manage, not to mention expensive. The high costs for these add-on products could easily be better spent elsewhere.

Data management is also tightly integrated with risk management. Portfolio risk is certainly a key risk assessment measure within an investment management firm, but we also view operational risk as having equal importance to the investment management process. The old saying “garbage in, garbage out” applies here and if you have data management tools embedded into your core applications you mitigate the operational risk of having bad data upon which you are basing your investment decisions or performing your compliance monitoring.

In the area of performance measurement and attribution, data management plays a similarly important role. So if your firm is “picking and choosing” attribution or other analytical data from different vendors for use in client statements and presentation reports, how do you know the data is accurate? By having embedded data management tools, you can screen the data and check for accuracy prior to running any reports. Trading (i.e. OMS) and other front office functionality, including compliance, are also definitely continued areas of focus for the firms we are talking to and a number are planning on making changes to their OMS or moving different assets classes onto one platform.

One thing that Cutter didn’t discuss is the Cloud, which we see as a key technology initiative for our clients. This sentiment seems to be echoed by other industry sources (Cloud Computing Has Become a Dominant Force in Financial Services) who see the Cloud and Cloud services (also known as outsourcing) as a way to create operational efficiency while giving investment management firms the ability to rapidly increase their AUM without the traditional escalation of IT infrastructure and associated costs.

Lastly, Cutter points out that ROI is hard to measure (which may be true), however, we feel it is best measured as the firm grows. For example, we had one client tell us that they had the same number of traders at $30 Billion AUM as they did when they first deployed our integrated OMS and Back Office at $2 Billion. For us, there is no greater testament to ROI than this. As we discussed in our last blog post, every problem is an opportunity. Investment management firms that put aside their fears and instead approach the aforementioned issues with optimism and good decision making will come out ahead and outgrow their competitors.

What’s your take? Share your thoughts with us on LinkedIn.

The post More Predictions for 2012 appeared first on INDATA.

As we settle back into the swing of things, we take a moment to reflect on the year that was and the year ahead. It’s no secret that 2011 was a challenging year for the financial industry. A mood of uncertainty dominated which was combined with market volatility and industry missteps, such the MF Global debacle. In this environment, compliance, regulations, transparency, risk management, data management and the cloud were the big topics for just about every firm.

For 2012, we foresee much of the same: another challenging year with firms trying to maneuver in an uncertain environment. The key difference between 2011 and 2012 so far seems to be one of outlook, in which we see more optimism from the folks we are speaking with than we did last year. Taking this optimistic view, every challenge or problem is truly an opportunity. The key is finding where the opportunities lie. Knowing exactly where you want to go, how to get there, and what’s standing in your way will help ease the challenges that lie ahead.

For 2012, we’ll cover the most pressing industry topics (and then some), highlight relevant viewpoints and make sure to get your thoughts as well. After all, the more we know and the more we share, the more everyone benefits.

Here’s to an inspired year!

With that, we ask you: what are the biggest issues facing your firm? How do you plan to address them? Tell us on LinkedIn.

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While appointing a new position is a start, how can one individual effectively monitor data in a systematic way as is being suggested?

This is where technology comes in. For investment management firms, data management has often been viewed as a separate area outside of the scope of core investment functions such as portfolio, accounting, compliance, trade order management, etc.

Many times these systems do not use data management technology and instead rely on a batch processing/reporting model in which administrators have to “chase down” issues that affect data integrity and operational risk. This becomes even more of a challenge if the organization uses multiple systems, i.e. the silo-based approach (more about that here).

Without data management technology, the task of monitoring data can become overwhelming. At INDATA, we view data management as a core function of the software itself much like the other functional areas we cover for portfolio modeling, trade order management, compliance, back office, performance, reporting, billing, CRM, research and the other key areas of the investment process.

Utilizing systems that employ data management technology (instead of a chief protection officer or other executive within the organization, such as the chief compliance officer, to chase down data issues) will bring to light any exceptions, outages or issues before they become a problem.

The post Effective Data Management Tools Key to Satisfying New Regs appeared first on INDATA.

For investment managers this can mean the front-office does not communicate with the back-office and vice versa. A good analogy would be that the right hand doesn’t know what the left hand is doing. Here is the silo-based, legacy system architecture that is prevalent in many buy side systems:

Given all the emphasis on data management, eliminating silos is the most basic way that investment management firms can eliminate risk while improving productivity in the process.

As recent industry trends have shown, these business risks are unnecessary and can turn into a real problem.

Information is the key to intelligence and barriers not only put firms at risk, they hinder the efficiency of the firm as a whole.

The post When Information is Siloed, Business Risks are Elevated appeared first on INDATA.

From our vantage point, we can say that a smarter move would be to take advantage of the current state of the markets, and implement changes now.  It would allow for a smoother, more accurate transition and time to fix any errors and/or gaffes. Hastily implementing changes before a deadline will prove to be more problematic and detrimental to workflow than anything else. In addition, implementing changes now allows firms to consider the bigger picture and really make changes for the better throughout the entire organization. Something not functioning the way it was originally intended? Now is the time to revisit those items and cut them or fix them. Byproducts of this process include streamlined workflows, increased operational efficiency and reduced costs.

Perhaps the most important reason not to wait to implement any changes: data management. Data is the crux of all the reforms which means then that data management will be the one initiative that firms need to get right in order to easily handle any upcoming regulatory reforms. Firms should be able to capture their data in real-time, standardize it and actually have access to it at any point in the day – with all the advancements in technology, there is no reason not to be able to do any of these. This means finding a technology partner who does not operate silos (more on this topic here.)

Proper data management will bring transparency to your firm, which will help grow the business in the long run, and it will bring transparency to the market in the even longer run, if each firm works to increase its transparency.

The point: each firm will eventually need to be able to capture data in real-time, standardize it and have access to it all day. The key to tackling this challenge is to prepare your firm now, rather than waiting for the last minute.

The post Waiting to Gauge Dodd-Frank Could Be a Bad Move appeared first on INDATA.

Our User Conference last week highlighted some of our clients who demonstrated that utilizing INDATA’s services, like System Administration and Corporate Actions, have actually saved them time and money and provided peace of mind.

Of course, this is from an INDATA perspective. You’ll have to check with your technology partner about the outsourcing services they provide to help their clients. Selecting your technology partner to outsource services also provides peace of mind, as they know their system better than anyone else. It’s worth a look.

The post Complying with Best Practices Can Save Money appeared first on INDATA.