Mega Trends in the Fund Industry Part II | Big Data

At the recent NICSA workshop ” Mega trends in the Fund Industry,” held earlier this month in Los Angeles, a panel of experts discussed the hot priorities for mutual fund and ETF managers: Liquid alternatives and Big Data.

data managementIn Part II of this NICSA News blog series, Theresa Hamacher, President, NICSA describes the importance of Big Data and how it is becoming an integral part of the fund industry.

Big Data. It’s no longer just talk; Big Data is becoming a fact of life in the fund industry.

There are a lot of reasons why data analytics has been slow to take hold in asset managers. First of all, asset gathering has been easy even without advanced market intelligence. Advisers have had other priorities, often as the result of new regulatory mandates. The required technology was too expensive for the midsized firms that dominated the business. And investment data is almost exclusively in proprietary databases and hard to access; there’s little open-source sharing in the investment industry world.

But, as panelists from InvestCloud, State Street and PwC explained, many of those barriers have crumbled in the last few years, just as asset managers have come to realize that they are missing out on the insights that data can provide. A recent State Street study found that while 9 out of 10 managers view data as a strategic priority, less than a third thought they were actually getting an advantage from that data.

That doesn’t mean that implementing Big Data approaches will be a walk in the park. Investment firms are still operating on a T+1 batch basis and will have to realign processes to work with intraday data. Technology pieced together from multiple systems will need to be streamlined. And the expanding variety of the data involved — which can include social media, video and voice recordings — will pose challenges for both storage and analysis.

Firms that have become leaders in the use of data have made their technology more efficient and abandoned large data warehouses, replacing them with a more flexible approach to sourcing information. More importantly, leaders don’t just use data analysis to describe the past; they rely on predictive analytics to drive decisions.

Of course, Big Data has its dark side, which is that it’s more easily stolen than the paper-based records of old. As a result, firms that want to get involved need to invest as much in cybersecurity as to the analytics.

Certainly, the SEC is paying attention to how firms are protecting their data, as keynote speaker Robert Robertson reminded the audience. Its Office of Compliance Inspections and Examinations is asking detailed questions about data governance policies, and firms will want to be prepared to respond.

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