The Data-Driven Investor: How Technology Changes the Game for Today’s Asset Owners

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This presentation highlights why data is driving a major transformation in the way asset owners manage their investments and the role advanced technology will play in the future. The research is based on a survey — conducted by the Economist Intelligence Unit — of more than 400 institutional investors, including 206 asset owners.

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The Data-Driven Investor: How Technology Changes the Game for Today’s Asset Owners

  1. 1. DATA & ANALYTICS The Data-Driven Investor: How Technology Changes the Game for Today’s Asset Owners Featuring highlights of the State Street 2013 Data and Analytics Survey Conducted by the Economist Intelligence Unit
  2. 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). More than 200 asset owners participated in the survey. Respondents by Region Respondents by Type 20% 33% 8% 8% 34% 16% 18% 11% 33% North America Europe Asia Pacific 19% Diversified Asset Managers Traditional Asset Managers Alternative Asset Managers Other Pension Funds Insurers Banks Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 2
  3. 3. DATA & ANALYTICS Five Trends That Will Stretch Asset Owners’ Data Systems Advanced Data Capabilities Will be Key to Meeting Many of the Industry’s Most Pressing Challenges Strategic Impact Data Challenge New Operating Models Asset owners are insourcing more asset management Front-office tools and infrastructure required to manage their own assets more effectively Move to Multi-Asset Portfolios Search for yield is driving more asset owners to embrace alternatives Multi-asset class risk and performance analytics New Approaches to Risk Management New risk-oriented approaches to investment New risk data on broader set of assets, combined with more sophisticated analytics Changing Investment Styles Major shift by pension funds toward liability-driven investment strategy New tools and data required to understand and model future cash flows versus liabilities Regulatory Evolution Massively increased reporting requirements as regulators adopt a “look-through” approach to risk Flexible platforms that enable data to be collected, transformed and reported on across multiple regulatory regimes 3
  4. 4. DATA & ANALYTICS Asset Owners are Investing Heavily to Keep Pace % Change In Investment into Data and Analytics Over Past Three Years (Asset owner respondents only) Significantly increased our investment (>20%) 12% Slightly increased our investment (1-20%) 71% Made no change Slightly decreased our investment (1-20%) Significantly decreased our investment (>20%) 12% 3% 1% Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 4
  5. 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 (Asset owner respondents only) Order Management Systems / Execution Management Systems • Front-office tools are an investment priority 60% Portfolio optimization 36% • Spend on data and analytics will continue to grow Performance analytics 29% • Need to move closer to realtime information Benchmark data 25% Risk analytics 23% Significant increase Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 27% 38% 44% 45% 40% Slight increase 5
  6. 6. DATA & ANALYTICS Data and Analytics are Now a Firm Priority for Asset Owners … Data is the Key to Addressing a Wide Range of Strategic Concerns (Asset owner respondents only) 2% 11% 35% • 87 percent of institutional asset owners view data and analytics as a high strategic priority • For 35 percent, data and analytics as the most important strategic priority 52% 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) or not at all a strategic priority Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit 6
  7. 7. DATA & ANALYTICS Yet the Industry is Polarized by Its Approach Data is a competitive asset … But few know how to use it • 63 percent of asset owners believe data will be a key source of competitive advantage in the future • Only 33 percent of asset owners are reaping the full benefits from their data and analytics capabilities today • 83 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. 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 42% • Integrating risk and performance analytics 72% 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. 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. 10. DATA & ANALYTICS Defining a New Service Model Data You Can Trust Adaptable Systems Smarter Insights Challenge • Accuracy of information is the top data challenge for asset owners (cited by 36 percent) • Systems must adapt to support multiple geographies, asset classes and regulatory regimes • Only 13 percent of asset owners 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 10
  11. 11. DATA & ANALYTICS In Summary: How to Become a Data-Driven Investor Integrate Your Data • Enterprise data warehouses help make information accessible and easier to analyze across the organization Get Smarter on Risk • New technology can help provide a holistic view of risk across multiasset portfolios Manage Regulation • Asset owners need flexible reporting platforms to meet evolving regulatory demands across multiple jurisdictions Accelerate Investment Decisions • In a world where investment opportunities are fleeting, real-time data can help asset owners to act faster on their investment insights Future-Proof Your Systems • Asset owners need flexible systems that can support new asset classes, complex mandates and offshore assets 11
  12. 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. © 2013 State Street Corporation CORP-0918 12

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