Aite Group Finds Support Growing for Investment Book of Records Approach
Rick McCarthy, vice president of sales and marketing for Americas, DST Global Solutions
Asset managers and wealth management firms are moving toward an unobstructed, holistic view of their investment data as they embrace an investment book of records (IBOR) approach, says Rick McCarthy, vice president of sales and marketing for the Americas at DST Global Solutions. The data management vendor sponsored a survey conducted by market research firm Aite Group, targeting investment data management issues for tier-one institutional asset and wealth management firms.
“Traditionally, asset and wealth managers were beholden to the closed-day process from their investment accounting systems and even the custodians,” McCarthy says. “What’s happening now is they’re moving more toward looking at positions and the returns on those positions on an intraday basis. To do so, you need a form of position keeping within the repository so you can do your on-the-fly valuations as the prices change.”
With a main repository, firms can then rebalance portfolios, view prospective trades and run the returns again before they send transactions onward for clearing and settlement, McCarthy says. The centralized, IBOR approach is gaining ground in Europe “but I think the IBOR trend is just starting to move across the ocean to North America,” he adds.
The more holistic view of investment data requires comprehensive data aggregation and this is the top challenge as cited by 62% of survey participants, according to the report, “Right Time, Right Content: Business Drivers for Smarter Investment Data Management.”
The research is based upon one-on-one interviews with 12 asset management firms and nine wealth management firms across Europe, North America, and Asia-Pacific during the second quarter of this year, according to Aite, which questioned seven firms from each region.
The major findings are:
- More than three quarters of firms, or 76%, have seen “a significant increase in the priority of investment data management across their firms over the last two years,” according to Aite. Officials from on firm say they are moving from data reconciliation and cleansing to using data for competitive advantage by enabling the “slicing and dicing” of investment or operational data and better data aggregation support;
- The research uncovered a disparity between wealth and asset manager drivers for spending on and prioritizing investment data management, according to Aite. A majority, 78%, of wealth management firms say regulation is their primary driver. Yet only 42% of asset managers name new regulations as the main motivation—they cite internal business requirements and client focus as having a greater influence for asset managers, with 75% citing these as primary drivers for investment.
- Wealth managers say their two top challenges are managing investment data are aggregating data (67%) and ensuring data consistency (also 67%). Nearly three-fifths of asset managers also struggle with aggregation (58%) but are more concerned than wealth managers about data latency (42%), according to the report. The asset managers’ latency concerns stem from a new focus on achieving more accurate and timely investment books of record, says Aite.
- Demands for data aggregation are soaring for a majority of asset and wealth management firms as 90% of them have witnessed a significant uptick in requirements over the past 12 months as a result of business, risk management, and regulatory reporting requirements, says Aite. Data aggregation is a real challenge for most firms as 19% feel that they can easily support internal ad hoc reporting processes.
- The Aite report finds that many firms are “struggling with old systems” with 29% of them managing investment data on systems that are more than 10 years old; some firms report they use a system “that is more than 20 years old.” Six of the 21 firms surveyed have IT platforms between one and three years old while one-fifth of the asset management firms do not have a system to manage investment data.
The survey finds that more than half of firms intend to invest in vendor technology to improve their management of investment data over the next 12 months while some survey participants (19%) want to add functionality to incumbent, in-house platforms, according to the report.
The costs associated with operational information inefficiencies such as data scrubbing, integration and aggregation will help buy-side firms get executive buy-in for new data management projects, McCarthy says. “Are the transactions losing money? Are the positions losing money? Or is the overall business losing money because it’s costing the firm too much to operate that particular book? If it’s the latter, then certainly the executive buy-in would have to be that the firm has to be more efficient from the front through to the back,” he says.
Interactive Brokers Embraces ISO 20022 for Announcements
Electronic broker Interactive Brokers Group has gone live with ISO 20022 corporate actions announcement messages, making it the fourth major industry player to endorse standards-based processing for corporate actions, according to the firm and the DTCC.
Interactive Brokers Group joins BNY Mellon, Brown Brothers Harriman, and JPMorgan Chase in processing ISO 20022 announcement messages for corporate actions including dividend, principal and interest, redemption, and reorganization events, such as mergers and tender offers, according to the DTCC.
“With ISO 20022 messaging, Interactive is enhancing customer service, helping reduce risk and enabling greater straight-through processing – well in advance of the 2015 deadline when all DTCC clients currently taking DTC’s proprietary CCF files will need to transition to ISO 20022 messaging for announcements,” says Daniel Thieke, DTCC managing director, asset services in a prepared statement.
The brokerage is embracing “state-of-the-art trading technology” for corporate actions “to provide our clients with the most accurate and efficient corporate actions information on a timely and cost-effective basis”, says Brian Sussman, vice president for clearing operations at Interactive Brokers in a statement.
The DTCC, via its subsidiary The Depository Trust Company (DTC), began providing the ISO 20022 announcement messages from its production system in late 2011 following a lengthy pilot program. A second ISO 20022 pilot was launched in September 2012 to test messages that cover the entire lifecycle — including entitlements, instructions, and payments for distribution events and began systemic client testing of the messages in February 2013. Interactive Brokers will now begin testing the next set of ISO messages for the lifecycle of distribution events, say DTCC officials.
Razor Risk Will Use Numerix’s Libraries
TMX Group’s Razor Risk technology will leverage Numerix’s risk and pricing model library to help firms develop enterprise-wide risk management strategies, according to a collaborative agreement between the two vendors. The Razor Risk technology will use Numerix’s models within its solutions for credit risk, market risk and economic capital management, officials say.
The collaboration is targeting firms that have to manage multiple-risks across asset classes and need “an integrated analysis of market, credit and liquidity risk within a single application,” says Richard Simon, vice president of TMX Technology Solutions, in a prepared statement.
Lighthouse Partners to Use SS&C’s CVA Service
Lighthouse Partners, a $7 Billion investment manager, will be outsourcing its credit value adjustment calculations (CVA) calculations to SS&C GlobeOp to support its managed accounts program, say officials at the firm and SS&C. The CVA is a modification to the value of over-the-counter derivatives contracts that reflects the risk of counterparty defaults.
Under the terms of the agreement, SS&C GlobeOp will perform CVA calculations and report to Lighthouse on a monthly basis, say officials. The methodology applied by SS&C GlobeOp uses credit spreads and is consistent with ASC Topic 820, US GAAP and IFRS 13 fair value guidelines. Netting agreements and collateralization are factored into the CVA calculations, officials add. The outsourcing arrangement is an expansion of a current relationship with SS&C.
Bloomberg Tradebook Turns to Broadridge for Clearing
Agency brokerage Bloomberg Tradebook is using Broadridge Financial Solutions’ business process outsourcing solutions to provide U.S. equities clearance and settlement services for its institutional clients, say officials at Tradebook and the vendor.
Tradebook is using Broadridge’s hosted solutions and back-office operations support to “minimize its technology and overhead costs,” say officials at Tradebook, which serves buy-side and sell-side firms with solutions for global equities, futures, options and foreign exchange trading.
Need a Reprint?
Leave a Reply