Velocity, Variety of Data are Buy-Side Challenges

"data and analytical capabilities have never been so strategically important."

(This article was first published on Best Execution, a Markets Media Group editorial platform.)

Global asset managers view velocity of data – the speed at which data is generated, distributed and collected – as the key challenge around enabling analytics to drive growth.

The research was conducted by SIX, for its annual Future of Finance report, which surveyed 343 C-suite executives at financial institutions, including asset managers, wealth managers, investment banks and asset servicers across the UK, Germany, Switzerland, Spain, the US, Hong Kong and Singapore.

Around half of asset managers highlighted the velocity of their inbound data as their primary challenge while investment banks (41%) were mostly concerned with the limited variety of data they were able to consume. Wealth managers cited volume of data (41%) as their key concern.

While almost half (48%) of asset managers respondents cited the velocity of their inbound data as the primary challenge, investment banks were primarily concerned with the limited variety of data that they were able to consume (41%). In contrast, wealth managers cited volume of data (41%), a viewpoint reflected by half of the asset servicing firms that were canvassed.

Financial institutions believe the front office stands to benefit the most from advancements in the capture and use of data. Almost half of executives see emerging data and analytics capabilities providing the front office with the greatest benefits over the next five years.

Market and pricing data – used predominantly to inform front-office decisions – is where respondents feel they will see the largest increase in spending, opted for by 43%.

In terms of regulation, 47% feel the shortening of the settlement cycle in the US could provide a positive opportunity to automate processes, increase efficiency, and reduce costs, many also believe it will create greater operational complexity for global institutions, with 45% citing this as a possible consequence.

Amid a changing regulatory backdrop, the overwhelming majority of respondents (95%) feel central counterparties will have an increasingly important role to play in reducing risks in markets over the decade to come, for both new and existing asset classes. Again, amid ongoing volatility, financial market infrastructure providers (FMIs) will become increasingly systemically important in the future, agreed upon by 91% of respondents.

The implementation of AI, artificial intelligence, was also a subject covered in the report, with 55% of respondents saying AI would be most valuable for faster and more accurate data analysis for enhanced decision making. The asset management sub-sector felt this most strongly, chosen by 58% of respondents.

Data analytics for value capture was selected as the main technology priority looking forward by 58% of global asset managers.

Shai Popat, head product and commercial strategy, financial information, SIX, said: “To effectively gain a competitive edge in a data-driven world, firms require a combination of advanced technology, data management practices, regulatory compliance, and a deep understanding of the financial domain. Indeed, data and analytical capabilities have never been so strategically important.

“While different industries face very different challenges with regards to their data, ease of access and the ability to analyse and derive insights from data will be of paramount importance to all players over the coming years. Without this, companies risk failing to remain competitive in an increasingly data-dependent landscape.”