Authored By
Vera Shulgina
Vera is responsible for Arcesium's data strategy with a focus on driving value for clients through data solutions and data partner integrations.
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The reality of modern investing is that external data is a critical resource asset managers need to help generate peak performance. To achieve your firm-wide goals, what data do you need and where are you getting it from?
As firms move through the complexities of managing diverse portfolios with an emphasis on multi-asset class strategies, creating a sophisticated data and operations framework is critical to navigating a data-driven investing model.
Enhanced returns are an outcome of successful implementation of data integration, transformation, and observability, driving the current trend towards centralizing data for asset managers to streamline processes and improve performance. A centralized data repository can help enable the onboarding of vast amounts of data per year. And while some asset managers and larger financial institutions have the knowledge and experience to onboard thousands of datasets per year – which gives them a performance edge – firms that still use a traditional, decentralized, model are behind on onboarding data at scale.
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A basic evaluation framework should consider attributes across data quality, data uniqueness, and overall vendor relationship:
Full breadth and depth of data coverage is necessary for the most accurate and reliable insights, especially for critical business operations. Sourcing multiple products in the same data category is a best practice for full history, geographic and demographic coverage, and granularity. A robust selection framework will ensure decision-makers select optimal products for their firm’s workflows and insights needs.
READ MORE: Framework for Data Sourcing
The importance of the legal and compliance operations that support onboarding new data can sometimes go unnoticed. Business leaders can mistakenly assume the risks and costs incurred from managing these workflows ad-hoc or in a decentralized way are natural and inevitable, unaware of the long-term damage and risk it exposes them to. A robust framework for legal and compliance when onboarding new data vendors is crucial for mitigating missed opportunities, non-compliance, and increased costs. Pitfalls of not having one are:
In addition to a flexible, modern data platform that can accommodate diverse data types, investing in scalable tooling and skilled resources accelerates data throughput for diverse business requirements. Considerations for a successful integration program include:1
Post onboarding, establishing clear criteria to measure the success of your ongoing vendor relationships is crucial. With well-defined metrics, you can better steer the commercial dialogue and drive product improvements, while also creating benchmarks for assessing potential future vendors.
When it comes to gauging a vendor’s effectiveness, several key metrics come into play:
Even if some of these metrics aren’t optimal or measurable at the start of the relationship, they provide a clear path forward for engagement. Strong vendor relationships are built on continuous communication, collaboration, and alignment of goals and expectations.
It’s important to recognize that these metrics are interconnected, with trade-offs to consider, and dependencies on your firm’s internal resources. For instance, prioritizing innovation might come with a slower path to ROI, while optimizing for low costs could compromise partnership quality. As you implement processes to measure and enhance vendor performance, be mindful of these potential trade-offs.
Specific metrics you may want to consider include:
Vendor measurement often also yields significant insights into internal teams’ levels of data-fluency and the steps that need to be taken to evangelize data throughout the firm.
Internal user groups ultimately own the perception of value in onboarded data. Building out comprehensive feedback loops with internal users, in addition to your vendors, supports successful outcomes. Reporting on vendor benchmarks and firm onboarding goals enhances accountability, optimizes resource allocation, and creates a roadmap for continuous improvement of your onboarding program. Similarly, identifying particular processes or deliverables that have significantly benefited your firm can influence the direction of service from your vendors and multiply your success.
Solving for data throughput, availability, and measurement isn’t possible without a strong data management foundation. With a mature ecosystem of partners offering data management solutions, there is less need for firms to build what is now a less-differentiated capability amongst peers. When a partner has domain expertise – and both tools and talent to integrate data for specific workflows onto a purpose-built platform – firms have more operating leverage to focus in-house resources on the most differentiated proprietary data and technologies.
Firms that want to consider partnering as a key part of their strategy for technology and data initiatives need to have the right framework to analyze and select prospective partners — the same way a framework would exist for data vendor evaluation or investment selection. A good benchmark for consideration would be to find a reputable partner that can offer up to 70%-80% of the required solution.
Pros of partnering include:
BUILD, BUY, PARTNER: A Framework for Optimizing Time to Value of Your Data Initiatives
Accelerating data onboarding is essential for asset managers to gain a competitive edge and achieve peak performance in today’s data-driven investing landscape. It’s key to establish thorough evaluation frameworks, build scalable legal and compliance processes, deploy the right tools and talent, implement robust measurement and feedback loops, and select technology partners that give your firm’s resources leverage. This enables firms to unlock the full enterprise value of their data assets.
A centralized data management strategy empowers organizations to onboard and manage vast amounts of high-quality data seamlessly to future-proof their operations and maintain a sustainable competitive advantage in an ever-evolving market.
The best practices for data throughput acceleration are straightforward, but require dedicated time and attention to achieve the desired effects on operational efficiency and profitability. By prioritizing best practices for data onboarding, firms can navigate the complexities of multi-asset class strategies with confidence, leveraging data fluency to generate superior insights and deliver exceptional returns for their clients. Working with a trusted partner like Arcesium can help build strong, productive relationships, and allows your firm to focus on the higher-value work that comes after data onboarding.
Sources:
1 Raw to Refined: A Framework for Data Sourcing, Arcesium, October 9, 2023.
