New research sheds light on where Canadian firms diverge from global peers – or lead the pack – in their data strategy
Fundamental changes in the asset management sector have been building for some time as institutional investors seek competitive advantage through innovation. Nevertheless, the pandemic market upheaval and remote working environment have expedited the speed of transformation.
In the first installment of new research titled Data Transformation in Asset Management: Canada vs. the World, BNY Mellon uses its global insights and CIBC Mellon’s local experience to contextualize selected areas where Canadian asset managers are leading or following the worldwide consensus in terms of their data strategy.
Head of OMNI Digital Services at Canada, Darcie James Maxwell, said, "Data is increasingly being recognized as one of the most important asset classes for institutional investors – as an operational tool, as a source of competitive investment intelligence, and even as an investable asset in its own right."
"The pandemic remote environment redefined the market landscape and has accelerated existing trends. Firms will need to draw on functional knowledge as well as data science techniques to create and proliferate needed capabilities," said Joe Lacopo, Vice President, Relationship Management and Segment Co-lead, Asset Managers.
While both Canadian and global managers indicated plans to outsource their distribution, Canadian managers show lower-than-average appetite to outsource their trading activities. That could reflect a conviction among Canadian firms that in-house trading operations, specifically their in-house talent, are driving value.
And compared to 78% of all respondents expressing plans to outsource their data operations, only about half of Canadian asset managers said they plan to explore outsourcing relationships, or expand their current relationships in outsourced data operations.
A variety of factors have contributed to the desire for additional and larger data sources.
The demand for numerous institutional investors comes from front office teams attempting to keep up with the competition for investment possibilities has raised pressure to digitize operations and revealed inefficiencies in the data supply chain supporting front-office employees.
It has also highlighted the issues facing middle and back-office operations a widening chasm between data infrastructure and operations. In a survey of asset managers covering Canada and other regions conducted by CIBC Mellon, about half of respondents said they faced challenges in obtaining real-time, high-quality data, and aggregating across fragmented infrastructure to build one single, centralized source.
To better serve their clients, management service providers have improved their data capabilities. Software for data management is available in both desktop and mobile versions. Cloud computing, both private and public, is rapidly evolving.
Before the pandemic, many asset managers had begun to embrace digitalization, and business continuity and resiliency had long been discussed. The emergence of COVID-19, on the other hand, increased the need to adapt and integrate new technology. The urgency was heightened by market volatility and constantly shifting situations.
The drawbacks of relying on manual and paper-based processes were exposed with the rise of remote work. As a result of the ongoing pandemic, there has been an increase in the desire for social distancing and remoteness. Above all, the pandemic underscored the significance of business process resiliency and the kind of agility that allows asset managers to respond to – or prevent – disasters.