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Point by Point: The Impact of Data Management Initiatives on Investment Management Technology

What data management initiatives are impacting investment management technology?

Investment managers are looking at a regime of regulation that is impacting them in such a way that it places a huge burden on the investment management technology required to maintain data within the firm. This also means that they will be looking at a rationalization of operating models within investment management firms. Ultimately, the foundation of every operating model is the data model or the underlying data infrastructure. This is something that firms will have to think about in terms of whether they intend to consolidate their federated systems or, if they’ve already pursued a centralized model, how close they are to being fully centralized.

The test of maturity of investment management technology for data management within a firm is the ease and timeliness with which the many sets of interconnected data that they will need to source and deliver. For example, will it be a friction-free process to prepare the reporting data for regulations such as MiFID II, managing the data flows to the various ARMs, APAs and national competent authorities.

What is the impact of MiFID II on investment managers?

Investment managers are going to see a whole new array of classification schemes and a multitude of different types of data flags that are needed in order to satisfy the national competent authorities. Because of this they are also faced with lots of challenges that will necessitate technology to help firms reinvent their processes in order to meet that reporting obligation. Predicated on all of the reporting obligations is the need for new data sets, including new reference data sets, new classification schemes, or instrument level definitions that are stored within systems internally at the firms, but which are not as yet being aggregated for the reports that a firm currently has to deliver.

What choices do investment management firms need to take regarding their operating models?

They will likely see a result wherein firms will think about what they want to outsource, what they want to do in-house or do a partial out-sourcing with the combination of in-house processes. This really is a redefinition of the way a firm will operate and how it will do business in the MiFID II world.

What are the implications for the reporting capabilities of the investment management firms?

Firms are sitting on investment management technology which hasn’t been refreshed in many years and cannot cope with the data that is now going to come down the pipe. Under MiFID II for example, the reporting obligation is a lot more onerous, which means the ball is firmly in the court of the firm and their response the set the tone for their future operational efficiency and flexibility.

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