Chasing Alpha: Data and Analytics for Alternative Asset Managers
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Chasing Alpha: Data and Analytics for Alternative Asset Managers

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Featuring highlights of the State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit

Featuring highlights of the State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit

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  • 1. DATA & ANALYTICS Chasing Alpha: Data and Analytics for Alternative Asset Managers Featuring highlights of the State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit
  • 2. DATA & ANALYTICS About the Research A global survey of more than 400 asset managers and institutional asset owners on investment data and analytics, conducted by the Economist Intelligence Unit on behalf of State Street (August and September 2013). Of the participants, 81 were alternative asset managers. Respondents by Region Respondents by Type 20% 33% 8% 8% 34% 16% 18% 33% North America Europe Asia Pacific 11%  Diversified Asset Managers  Traditional Asset Managers  Alternative Asset Managers Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 19%  Banks  Insurers  Pension Funds  Other 2
  • 3. DATA & ANALYTICS Five Drivers of Change in the Alternative Asset Management Industry Advanced data capabilities will be key to meeting many of the industry’s most pressing challenges Strategic impact Data challenge The search for alpha Institutional investors will seek out managers that deliver exceptional performance Investors demand more transparency Managers need to provide more reliable information to investors across investment cycle Data systems must enable managers to extract investable insights from data and achieve performance attribution at a granular level Managers that can report on performance and risk data in a way that is tailored to the client’s needs will have a competitive edge New emphasis on risk management Managers need to demonstrate strong risk credentials to investors Need for risk data on broader set of assets, combined with more sophisticated analytics Real-time focus More data to be accessed and analyzed in real time; hedge funds seek to achieve zero latency Increased focus on trading solutions that support real-time decision-making, as well as the ability to capitalize on trading opportunities Regulatory complexity Greatly increased reporting requirements from domestic and international regulators Flexible platforms that enable data to be collected, transformed and reported across multiple regulatory regimes and formats 3
  • 4. DATA & ANALYTICS Alternative Asset Managers are Investing Heavily to Keep Pace % Change In Investment into Data and Analytics Over Past Three Years (Alternative asset manager respondents only) Significantly increased our investment (>20%) 14% Slightly increased our investment (1-20%) 80% Made no change 6% Slightly decreased our investment (1-20%) 0% Significantly decreased our investment (>20%) 0% Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 4
  • 5. DATA & ANALYTICS Investment is Targeted at Front-Office Execution and Decision-Making Tools How Investment Will Be Prioritized Across a Range of Data Tools (Alternative asset manager respondents only) Order Management Systems / Execution Management Systems • Front-office tools are an investment priority Portfolio optimization 51% 22% • Spend on data and analytics will continue to grow Performance analytics • Need to move closer to realtime information Benchmark data 25% Risk analytics 25% 32% Significant increase Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 38% 59% 40% 46% 42% Slight increase 5
  • 6. DATA & ANALYTICS Data and Analytics are Now a Firm Priority for Alternative Asset Managers… Data is the Key to Addressing a Wide Range of Strategic Concerns (Alternative asset manager respondents only) 4% • 96 percent of alternative asset managers view data and analytics as either a high or the most important strategic priority 47% 49% 0% 0% • For 47 percent, data and analytics is the most important strategic priority It is the most important strategic priority It is a high strategic priority (near the top) It is a mid-level strategic priority It is a low-level strategic priority (near the bottom) It is not a strategic priority Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 6
  • 7. DATA & ANALYTICS Yet the Industry is Polarized by Its Approach Data is a competitive asset … But few know how to use it • 71 percent of alternative asset managers think data will be a key source of competitive advantage in the future • Only 31 percent of alternative asset managers are reaping the full benefits from their data and analytics capabilities today • 94 percent increased investment in data infrastructure in the past three years • Our research reveals that a capability gap is opening up between data leaders and data laggards An Industry Divided by Data 1. “Data Leaders” – Companies in the survey whose data and analytics are already a source of competitive advantage 2. “Data Laggards” – Have yet to gain full benefit from their data Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 7
  • 8. DATA & ANALYTICS Data Leaders are Better Prepared for the Challenges Ahead Leaders Data leaders are more confident in ... Laggards % confident in capability (All respondents) 70% • Generating forward-looking insights from data 43% 72% • Integrating risk and performance analytics 50% • Optimizing their electronic trading strategies 64% 53% By contrast, data laggards are … • More likely to get distracted by the complexity of data management X % agree with statement (All respondents) 7% 33% • Less likely to feel their data capabilities are keeping pace with the growth of their business Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 92% 50% 8
  • 9. DATA & ANALYTICS Data Leaders Have Smarter Tools for Managing Risk, Compliance and Performance % that view area as a strength (All respondents) Leader 81% Tools for regulatory compliance Laggard 63% Leader 60% Multi-asset class risk tools Laggard 38% Leader 70% Custom benchmarks/indices Laggard Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 59% 9
  • 10. DATA & ANALYTICS Defining a New Service Model Data Readily Available Adaptable Systems Smarter Insights Challenge • Data integration (cited by 38 percent) and accuracy of information (cited by 37 percent) are the top data challenges for alternative asset managers • Systems must adapt to support multiple geographies, asset classes and regulatory regimes • Only 17 percent of alternative asset managers have all of the talent they need to manage data effectively Solution • Trusted data providers • Systems that support global reporting • New outsourcing models focused on insight as well as cost • Integrate data to achieve “one version of the truth” • Integrated view on risk and performance Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 10
  • 11. DATA & ANALYTICS In Summary: Outperforming the pack Integrate your Data • Alternative asset management firms need to invest in enterprise data warehouses and better data governance Manage Regulation • Develop reporting systems with the flexibility to meet evolving regulatory demands across multiple jurisdictions Improve Performance Analytics • Provide investors with more transparency into the basis for their performance Accelerate Investment Decisions • Better, more accurate and timely data is key to making better investment decisions and being able to act on these insights in real time Future-Proof Your Systems • Alternative asset managers need flexible systems that can adapt as investment goals and strategies evolve 11
  • 12. DATA & ANALYTICS This document is for marketing and/or informational purposes only, it does not take into account any investor's particular investment objectives, strategies or tax and legal status, nor does it purport to be comprehensive or intended to replace the exercise of a clients own careful independent review regarding any corresponding investment decision or review of our products and services prior to making any decision regarding their utilization. This does not constitute investment, legal, or tax advice and is not a solicitation to for products or services or intended to constitute any binding contractual arrangement or commitment by State Street and/or any subsidiary referenced herein to provide securities services. State Street hereby disclaims all liability, whether arising in contract, tort or otherwise, for any losses, liabilities, damages, expenses or costs arising, either direct or consequential, from or in connection with the use of this document and/or the information herein. This document contains certain statements that may be deemed forward-looking statements, which are based on certain assumptions and analyses made in light of experience and perception of historical trends, current conditions, expected future developments and other factors believed appropriate in the circumstances. © 2014 State Street Corporation CORP-0940 12