survey results Index & Benchmark Data Management The RIMES 2013 Buy-side Survey 2013 RIMES Technologies
Background Methodology As part of its 2012 outreach program, RIMES chaired 25 industry forums in global financial centers. There were 275 participants, representing a good cross-section of functions within 133 firms. Each forum was recorded and the findings were summarized in an individual synopsis that captured the essence of the discussion. RIMES has collated the discoveries of the 2012 forums in a white paper, Getting to grips with index data and benchmarks: Building an effective operating platform to improve data governance. Towards the end of 2012, RIMES conducted additional quantitative research among forum participants. The purpose of this was to gauge perceptions of industry dynamics and the overall direction of the buy-side in 2013. The response to the survey was both positive and informative, and the results are summarized here. Many of the responses confirm or reinforce the findings of our white paper. The RIMES 2013 Buy-side Survey canvassed 275 heads of departments and senior professionals from buy-side firms. All of the respondents had participated in RIMES forums during 2012. The research comprised a simple questionnaire asking 16 questions about the state of the buy-side and its strategic direction. The response to our survey is very encouraging. We received 51 completed questionnaires from some of the largest buy-side institutions across the globe, including custodian banks, insurance companies, investment managers, hedge funds, pension funds, private banks and wealth managers. Similarly, respondents represented a good sample of business functions, including compliance, data management, front office, IT, operations, performance measurement and risk. All survey respondents are regular users of index data and benchmarks, familiar with their unique attributes and processing requirements. Respondent firms varied in size, with total AUM (assets under management) ranging from up to US$30B to those managing US$100B and over. For more information on this survey, our white papers or the RIMES forums, email marketing@rimes.com. 2
1 Respondents by Location 32 % North America 62 % Europe Edinburgh Frankfurt Geneva Hanover Lausanne London Paris Rijswijk Zurich Baltimore Boston Chicago Los Angeles Montreal New York San Francisco Toronto Sydney 6 % Asia Pacific 2 Respondents by Business Area 3 Respondents by Size of Firm 3.9% Custodian Bank 5.9% Insurance Company 72.9% Investment Manager Hedge Fund 19.6% Up to US$30B 9.8% US$31B 50B 3.9% Pension Fund 7.8% Private Bank Wealth Manager Other 23.5% US$51B 100B 47.1% Over US$100B 3
Results The global investment management industry is characterized by burgeoning volumes of data. Index data and benchmarks are a crucial component of financial data and they are growing in both volume and complexity. If predictions about increasing volumes and complexity are correct, investment management firms must find new ways to increase efficiency and boost productivity. 4 Is the number of indexes & benchmarks that you use going to change? Increase 76.5% Decrease Stay the same 21.5% 0 20 40 60 80 100 The state of the data Characteristically different The RIMES forums indicate that index data and benchmarks are receiving a lot of attention within investment management firms. Why? Index data and benchmarks are all pervasive to the investment management value chain and the data is characteristically different from other data sets. 5 Is the cost of licensing index data going to change for your organization? Increase 82.4% Decrease Stay the same 17.6% 0 20 40 60 80 100 Our survey suggests that data volumes will continue to grow: 76% of respondents expect the number of indexes and benchmarks to increase (Chart 4) Most respondents have made predictions about growth rates over the coming year: 69% of respondents expect their number of indexes to increase by up to 10% 26% of respondents expect their number of indexes to increase by 11-20% As firms need to use increasing volumes of index data and benchmarks, most anticipate increasing licensing costs: 8 of respondents expect index data licensing costs to increase (Chart 5) Respondents anticipate rising volumes of index data and benchmarks over the coming year with a substantial increase in demand for blended cross-asset, custom and bespoke indexes. 82 % expect index data licensing costs to increase 4
80 % anticipate client demand for benchmark customization to increase The important message for the industry is that increasing volumes of index data and benchmarks are being accompanied by increasing complexity. This potentially creates a data management challenge for all industry participants. Most indexes have unique characteristics and processing requirements so data management costs are also likely to increase. (Chart 6) The majority of respondents expect complexity to increase even further: 80% of respondents anticipate client demand for benchmark customization to increase (Chart 7) 6 Do you anticipate demand for the following types of indexes? Alternative investments 31.4% Alternativeweighted Blended cross-asset class Commodities Custom or bespoke indexes Emerging or frontier markets Shariah-compliant Other 9.8% 7.8% 23.5% 19.6% 51% 37.3% 56.9% The state of the players The proliferation of index data and benchmarks has produced some common challenges for the buy-side. Frequently those who acquire the data are not those who use it. Data acquisition, management and usage are often spread over disparate functions, including data management, IT and performance measurement. 7 Do you anticipate that your clients demand for benchmark data customization will change? Increase 80% Decrease Stay the same 20% The survey confirms that many departments and functions use index data and benchmarks for diverse purposes. (Chart 8) 8 Which departments or functions use index & benchmark data within your organization? Firms have addressed the data management challenge in different ways but the survey suggests that many are tending to centralize index data and benchmark management to improve control. This trend seems likely to endure: 86% of respondents predict that the current trend towards centralization of index and benchmark data will continue Compliance 6 Data Management Front Office 66% 70% IT 26% Performance Risk 80% 94% The move towards centralization suggests that investment management firms are taking data management seriously. However, there is also growing awareness that this is difficult and costly to manage. The survey suggests Other 18% 5
Results that there are perceived benefits in adopting a best practice approach to index data and benchmark governance. Respondents prioritized the benefits of a best practice approach as: The survey also revealed different perceptions across departments. This would seem to suggest that there are varying levels of understanding of the data between different departments within a typical investment management firm. In many cases, those who acquire and manage the data are not those who use it. In practice, the successful management of index data and benchmarks calls for both technical and business expertise, which are often embedded in specific departments. (Chart 9) In most cases, the responses of data management and performance measurement departments were virtually identical. However, there were some noticeable divergences, which are listed below. Data management professionals are more aware of increasing data volumes, as they are responsible for onboarding and storing the data: 81% of respondents within data management expect volumes to increase substantially over the next year 71% of respondents within performance measurement expect volumes to increase substantially over the next year Similarly, those involved in data management tend to be more aware of license costs than those in performance measurement: 91% of data management respondents anticipate an increase in data licensing costs over the next year 75% of performance measurement respondents anticipate an increase in data licensing costs over the next year 72 % believe that adopting best practice in index & benchmark data governance will result in better data quality Efficiency Quality Regulatory/ Compliance Reputation Within larger firms there is a greater emphasis on cost control and efficiency: 71% of respondents from firms with AUM of greater than US$100B believe that improved data governance would increase efficiency 6 of the total survey population felt that improved data governance would increase efficiency However, larger firms tend to be less concerned about quality than smaller firms: 54% of respondents from firms with AUM of greater than US$100B believe that improved data governance would increase quality 7 of the total survey population felt that improved data governance would increase quality The above feedback suggests that larger firms are more focused on overall cost management than data quality. Smaller firms and individual functions tend to be more aware of specific data needs and the ongoing need to maintain data quality in the absence of a specialist team or expert help. 9 What do you believe are the main benefits of adopting best practice in index & benchmark data governance? Cost 48% 14% 34% 6 7 94% 47 6
10 What will your index & benchmark data management priorities be next year? More Importance Less 1 2 3 4 5 6 7 8 1 Cost Control 3 3 6% 4% 10% 10% 4% 2 Centralization 1 4% 3 14% 20% 8% 8% 3 Data Governance 8% 6% 24% 3 1 6% 8% 4% Ranked by importance 4 Validation 5 Storage 6% 1 10% 6% 30% 34% 4% 4% 34% 26% 26% 6 Sourcing 7 Formatting/ Integration 4% 16% 14% 14% 1 10% 28% 8% 8% 1 14% 8% 18% 30% 8 Distribution 1 8% 14% 8% 28% 26% Conclusions Fragmented expertise underpins the case for addressing index data at executive level. Data management professionals are more concerned about data costs, while functions that use the data, such as performance measurement, are more aware of the complexity of the data. The RIMES survey confirms an increasing interest in index data and benchmarks throughout the buyside. Many firms now recognize the need for strong data governance. Good data governance ensures that the right data is being sourced to meet current and emerging business needs and that its use is in line with the appropriate license agreement. Our survey indicates a trend towards centralized data management. While this is encouraging, centralization must enable a strategic data operating platform that aligns data acquisition with business needs. Please visit /solutions to learn more about the benefits of implementing a strategic data operating platform 7
About RIMES Founded in 1996 specifically to serve the complex data needs of the buy-side, RIMES Technologies Corporation is a specialist provider of managed data services and one of the pioneering adopters of cloudbased technology to deliver highly customized financial data over the internet. Delivering world-class data, supported by first-class service remains a focus of RIMES today. RIMES is a unique global company, combining the best people with the most forward-thinking technology. The RIMES team of experts has unparalleled practical experience, gained at the heart of the industry, enabling them to deliver this service to over 200 institutions in 36 countries across the globe. The RIMES Benchmark Data Service (RIMES BDS ) provides data in a format that is ready for use in third party or proprietary client applications. All data supplied by RIMES is validated and thoroughly checked for accuracy. This frees clients to focus on their core business issues and enables them to become more agile and streamlined. RIMES BDS is used by a cross-section of buy-side firms. Customers include investment managers, pension funds and custodians. RIMES BDS manages their entire benchmarks data workflow and contains all the data they need to operate efficiently. Banking & Finance 2011 B&F ICT Innovation Award RIMES Technologies RIMES has earned several industry awards over the years: the Inside Reference Data Award for Best EDM Initiative, the Banking & Finance Award for Innovation and the Best Product Implementation at a Buy- Side Firm and Best Data Provider to the Buy-Side the latter for the 6th consecutive year at the Waters Buy-Side Technology Awards. North America New York (Headquarters) 84 Wooster Street New York NY 10012 USA + 212 334 6866 Seattle 1700 Seventh Avenue Seattle WA 98101 USA Boston 101 Federal Street Boston MA 02110 USA +617 342 3689 EMEA London No. 1 Cornhill London, EC3V 3ND, UK +44 (0)20 7743 6040 Paris 13 avenue de l'opéra 75001 Paris, France +33 (0)1 78 09 70 70 Nicosia Gerasimou Markora 3 Nicosia 1075, Cyprus +357 22 028 045 Asia Pacific Sydney Australia Square 264 George Street Sydney, NSW 2000 Australia +61 (0)2 9258 1189 Shanghai China Insurance Building, Suite 1411 166 E. Lujiazui Rd. Shanghai, 200120 China +86 21 5888 6108 Email marketing@rimes.com Find out more at /what-we-do 8