The squeeze in margins brought about by the increasing adoption by investors of low-cost index funds is increasingly forcing buying companies to do more with less. Downsizing and mergers have become commonplace as investment managers struggle to expand their assets and lower operating costs.
At the same time, more data is available than ever before, with the potential to help companies differentiate their product offerings, uncover new sources of alpha, and lower their trading and reporting costs.
The Fourth Edition of State Street Growth readiness study shows an increased appetite for using alternative data and engaging external vendors to improve investment intelligence. Sixty-seven percent of respondents say the use of alternative data in investment analysis, such as satellite imagery, social media posts, foot traffic and transition data, has become a priority for their organization over the past year.
But organizations struggle to manage and leverage their data, constrained by siled databases and legacy technologies that make data governance, retention and access both difficult and inefficient. In addition to these obstacles, there is the tendency to reduce the size of operational teams, whose mandate includes data management.
Most of this data has an extremely short retention period, so prompt delivery is paramount. Investable cash, encumbered collateral and loaned securities lose much of their value if data is not available to the front office in near real time.
With traditional data warehouses, the cost and overhead of capturing the depth and breadth of data on the front, middle and back office was prohibitive and often impossible. This meant that large amounts and sources of data were either discarded or inaccessible to the business in a timely manner. These solutions were also designed primarily to capture and store data, without giving too much thought to enabling self-service reporting and visualization capabilities for investment professionals.
“The asset management industry is undergoing a major change. Historically, investment data was consumed in the moment. The storage and retention of historical data was excessively expensive and operationally intensive. Cloud-based data warehouses have broken this barrier. These platforms capture the volume, speed and variety of data generated by trading, risk, compliance and portfolio management systems – capabilities that seemed impossible just a decade ago.
John Plansky, Head of State Street Alpha
THE DATA CLOUD
To address these shortcomings, providers of investment services and solutions have adopted cloud-based data management. By eliminating the need for investment managers to bring data centers hosted and maintained in-house online, data clouds provide on-demand scalability for businesses expanding into new geographies, launching new geographies. new product offerings or consolidate acquisitions. Operations can now be outsourced to the data cloud provider, allowing companies to focus on generating returns, managing portfolio risk, and collecting and holding assets.
Data clouds have facilitated significant innovation in platform architectures. Static data models have become extensible, allowing businesses to easily integrate new data sources. Notably, cloud-based data markets now allow startups and legacy vendors to deliver new structured and unstructured data to asset managers looking for differentiated investment ideas.
Time-to-insight is also accelerated by the data cloud. By storing data “in place” and eliminating data movement, queries that once took hours are now executed in seconds. In turn, this enables powerful self-service data visualization and reporting so that portfolio managers, traders, analysts and risk managers can access and analyze the information they need to make decisions and immediate and better informed information.
ALLOW FOR NEW SYNERGIES
In a recent item On the data challenges facing investment managers and asset owners, State Street Alpha head John Plansky articulated a number of synergies from cloud-based data management.
By providing a near real-time and easily accessible view of asset manager data, the data cloud enables more profitable securities lending, optimized collateral and cash management, and better securities trading elections. informed aligned with long-term investment policies and strategic allocations.
Portfolio managers and quantitative analysts are increasingly leveraging machine learning (ML) and artificial intelligence (AI) to gain new knowledge and design portfolios potentially capable of generating non-risk-adjusted returns. correlated. ML and AI require large volumes of high-quality historical data to extract features that have predictive value.
By leveraging the time series storage and engineering capabilities of the data cloud, investment professionals can create models that form the basis of more robust and differentiated portfolios. Centralized storage and on-demand access through the data cloud further accelerates the ability to quickly control new sources of structured and unstructured data that can generate insight.
By capturing detailed and time-stamped trade data from their order and execution management systems, and enriching it with market prices and other information from sales firms and external suppliers, traders get important information. Knowing the most efficient execution algorithms in varied market environments and identifying the liquidity platforms and brokers / traders providing the most efficient executions for the markets and asset classes in which they trade helps companies reduce their trading costs.
Rebuilding a particular business or investment decision to answer investor or regulatory questions is usually a time-consuming spreadsheet-based exercise. By capturing the breadth and depth of data at all times, compliance staff can instantly recreate the market conditions in which traders and portfolio managers were operating at the time of the trade.
PRESENTATION OF THE ALPHA DATA PLATFORM
At State Street, we’re reinventing the future of data management for investment firms, asset owners and wealth managers. State Street Alpha is the industry’s first front-to-back platform from a single vendor. the Alpha Data Platform, powered by Snowflake® and powered by Snowflake Data Marketplace, forms the foundation of Alpha, enabling businesses to seamlessly capture and leverage internally generated and externally acquired data to generate new investment insights , bring innovative products to market more quickly and reduce their trade and declaration costs.