As part of our regular industry studies, we recently surveyed asset managers and service providers to understand the state of the market for Managed Data Services (MDS). We then followed this with a Davies Signals round-table event where we hosted a cross section of asset managers representing different sizes and geographies. Our aim was to understand whether there is a divergence between providers’ abilities to deliver fit-for-purpose solutions and the asset management community’s appetite to use them. Below is a summary of the questions we explored, the responses we received and key statistics relating to the overall results.
Is there demand for Managed Data Services?
Our study shows that, overall 58% of asset managers already use MDS and a further 32% are considering doing so; of those 63% plan to expand use while the remaining 38% will maintain current use.
Industry pressures on fees keep pushing asset managers to focus on core value adds, so they are continually looking for opportunities to outsource low value add functions that do not provide market differentiation.
This rosy view is however countered by a surprising statistic that only 13% of respondents believed using a service provider had achieved the anticipated benefits.
Data growth and complexity
Another potential driver to use MDS has been the increase in volumes and complexity of data, particularly in ESG. But notable counter arguments were also voiced:
- Service providers do not have a mature offering in many data types (though there are some exceptions).
- There is a perception that the MDS do not have the agility to respond to fast changing data requirements.
- Many asset managers are creating ESG metrics based on their own IP and are reluctant to share such data with a MDS.
Is Data Management a core capability that Asset Managers cannot afford to outsource?
Investment teams continue to ask for access to new data types. Asset manager data functions are on the hook to deliver such capability should it not be available from a service provider (timeliness or cost could be inhibitors). So, asset managers need to ensure they keep the skills necessary to respond. In addition:
- There was a strong view that if all data needs were outsourced to a service provider, it would be a point of no return. There would be no practical way of bringing the function back in-house at a later date should it prove unsatisfactory.
- Loss of commercial leverage was also a consideration, once a service provider is plumbed in, there is little that can be done – bar a costly, time-consuming replacement – should they increase costs.
- Some data processes and queries require asset manager interpretation and judgement calls; not something service providers can offer.
Does using Managed Data Services save time?
- Most services follow an 80/20 rule: 80% of time, data delivery is accurate and timely, while 20% of time issues arise. Remediating the problems takes a great deal of asset manager time and effort.
- Technology has come on leaps and bounds, allowing new data sources to be integrated rapidly, processes automated and quality rules applied. Delivering functionally rich internal data solutions is perceived as being not as challenging.
Have service providers missed the boat?
Asset managers have built and continue to invest in their data platforms – they have added new data types, distribution capabilities, improved governance and general tooling. There is now a very high hurdle should service providers be aiming to offer a functionally equivalent and cost competitive solution, and for asset managers to go through the migration process.
Many service providers draw the line on supporting some data – for example they often do not allow histories to be uploaded into their tools. This is problematic since performance and attribution histories are a cornerstone of most firms’ marketing efforts. So, the best a manager can hope for is a bifurcated solution, with an internal data management team supporting the data and functions the MDS do not cover.
Where does this leave service providers?
The demand from asset managers to be cost effective will be a constant encouragement to find the best solution to each problem. There is appetite for using ‘best in breed’ services to accelerate project delivery or provide skills that managers may not have in-house.
But providers must have a laser focus on being able to articulate the business benefit of their services – too often asset managers come out of a presentation of a new service wondering what the benefit would be.
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