Are You a Data Laggard or a Leader?

(February 6, 2014) — Investors who spend more money on data management systems and integrating data into their investment strategy are reaping the benefits of better returns, according to new research from State Street.

The bank, in association with the Economist Intelligence Unit, quizzed 200 asset owners on their attitudes to data capabilities, and found 83% had increased their investment in analytics and data harvesting over the past three years.

Front office tools, such as execution management and order management systems, topped the bill for the most important area for investment, with portfolio optimisation and performance analytics coming in close behind.

However, despite 66% of asset owners believing that having better data is a competitive advantage, just 33% are reaping the full benefits from their data and analytics capability. This has left 66% of asset owners lagging behind their peers.

“The most sophisticated and nimble investors tend to be the ones who have invested the most,” said Ian Hamilton, client management head of asset owners at State Street.

“Typically it’s the insurers who are looking for the competitive advantage, but the themes apply [to all asset owners]. If the investor is in-house focussed, they’re likely to buy in the software and build the systems internally, but most will seek to outsource.”

So-called data leaders are more confident in being able to generate forward-looking insights, and integrating risk and performance analytics, as well as getting the most out of their electronic trading strategies.

“What we’re seeing from our clients is that those with a greater handle on their data are able to exploit short-term investment opportunities—those one week, two week, three week opportunities,” said Hamilton.

“It can also help to predict market events and downturns in the market, allowing them to de-risk.”

Further findings from the asset management community on their views of data management are due over the next few weeks.

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