Data management theme for AM companies in 2016
The asset management industry will go through a fundamental shift in the way it manages increasing volumes of data, especially in regard to regulatory and investor pressures through the coming year, according to the latest outlook from technology and services provider Confluence.
Recent years of pressure to provide increased transparency has left a fragmented structure to the industry’s back office, in its use of technology. Meanwhile, asset managers are gathering increasing data about their business and investment strategies.
Todd Moyer, executive vice president, Global Business Development at Confluence, said: “In 2016, we predict the asset management industry will see streamlining and optimizing their data management processes as a way to reduce risk, manage cost and create new business opportunities.”
As a provider, Confluence sees three key trends:
- Data management reform in the asset management industry will top C-level agendas in 2016
- Chronic regulatory fatigue will continue as the asset management industry prepares for next round of mandate
- Decreased institutional tolerance for self-administered private equity firms will accelerate the back-office outsourcing trend
Regarding data management, Confluence believes that there is simply so much volume, that asset managers are increasingly feeling negative effects of “outdated and manual data management processes”. As businesses, they will need to look for more efficiency through technology.
And although asset managers have become better at understanding their own risk in regards to regulatory demands, Confluence argues that they are yet still – generally speaking – to recognise that new investment mandates continue to pile on data requirements.
For example, Confluence points to the US Securities and Exchange Commission Modernization proposal, which will affect 9,000 advisers to separately managed accounts and 13,000 mutual funds.
“In Europe, the new AIFMD reporting continues to impact a larger number of fund managers as the regime is expanded to non EU jurisdictions. Solvency II, an insurance regulation will create additional reporting burdens for asset managers from 2016.”
“The ongoing regulatory push for greater transparency has certainly delivered benefits to the market and investors alike. But achieving this level of transparency in the market has required an extensive investment of time and money, and quite frankly there is little sign that those costs won’t continue to rise. These regulatory mandates have made inefficient and ineffective data management approaches no longer an option for asset managers,” Moyer added.
Regarding private equity, Confluence points to evidence that suggests outsourcing of technology and related services demands will increase, because institutional investors are increasingly looking to this asset class.
The technology risk in the area of private equity is highlighted because of the longer lock in periods affecting investors; if the technology fails, it could take longer for the effects to be felt in contrast to, say, a daily traded open ended fund.
“Investors are holding private equity fund managers to a higher standard of transparency and control and there is a decreased level of institutional tolerance to allocate investments to private equity funds that are self administered. From our perspective, this is very much a trend other third party service providers are expanding their capabilities to play the same role they do in other asset classes. There are already a few fund administrators responding to this need, but we believe several more solutions will come to market in 2016 and beyond,” Moyer said.