This document summarizes an article from the Luxemburger Wort Newspaper regarding data management regulations in the investment management industry. It discusses how regulations will increase the need for reliable and accurate market and counterparty data aggregation. Firms can outsource data aggregation to skilled solutions providers to save money and efficiently meet regulatory reporting obligations. When choosing a data service provider, firms should consider the provider's adoption rate, experience, security practices, and ability to support global data needs.

1. Article appeared in the Luxemburger Wort Newspaper, Business Section (E-Paper)
Luxembourg | March, 2014
http://www.wort.lu/de
Authors: Alex Blumen (primary), Advent Software’s marketing team (secondary)
Article entailed our responses to questions from the newspaper regarding data management as it
relates to European regulations in the investment management industry.
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2014 is an important year in regulatory terms. How will these regulations affect the aggregation
and management of data?
Data aggregation has never been more important than it is today for firms. If you look at the
approaching regulations, data is at the heart of many of them from a compliance standpoint; both
market data and counterparty data. Regulations will impact aggregation and management of data
in several ways, most notably, creating the need for reliable, accurate data that helps provide
visibility and tells a story. It will also push firms to outsource the development and management of
data delivery vehicles in order to save money and transfer the maintenance to skilled solutions
providers.
For example, asset managers required to comply with Solvency II will need to acquire a range of
accurate data spanning GICS, Fund Constituent data, CIC’s and data required for calculating asset
values. The ability to consolidate data from many sources in a reliable way is critical to regulatory
reporting. As the data sources and complexity both expand, Advent believes firms should look to
leverage centralized services as the most efficient and reliable method for initial and ongoing data
mapping, data enrichment and secure data delivery
How can firms aggregate external data if it is required by regulators?
Electronic collection and delivery of data is becoming the industry standard and there are generally
two ways this is accomplished. Some firms choose to maintain their own connections to data
sources, however, that is more common when a very limited number of connections is required and
the file types and data elements are not complex.
Increasingly however, firms are looking at technology vendors to aggregate data for them. In
addition to having scalable processes that can collect data from dozens or even hundreds of sources,
vendors can also provide that key ingredient that often plagues financial services firms – data
normalization. Additionally, firms that use their solutions providers wisely are able to take
advantage of their vendor’s ability to connect to a virtually unlimited number of sources while
maintaining consistency in when and how the data is provided.

2. What is counterparty connectivity and why is it so important?
AIFMD compliance is a good example. Both Depositaries and Fund Administrators face huge
demands from a data management perspective under the AIFM Directive. For any Depositary
appointed by an AIFM running an onshore hedge fund, the scope of responsibility is greater than
that required under a Depositary Lite scenario for AIFMs running non-EU funds. This is because of
the strict liability placed on the Depositary to return assets to the AIF in the event that something
unforeseen happens and assets are lost.
The need for these entities to aggregate data from all of their client’s brokers and custodians
(counterparties) is central to having the required information for their AIFMD reporting. Part of the
reporting involves asset verification; the process of ensuring where a fund’s assets are held and who
owns them. This can’t be accomplished without reliable data that is gathered across the institutions
involved. Firms will want to ensure their solutions provider already has established relationships
with a wide network of both small-medium regional banks and also global banks and brokerage
firms.
What should funds look for when choosing a data service provider?
Advent recommends that firms need to do their homework before contracting with a provider.
There are four key issues that financial service companies need to consider before they migrate data
aggregation functions to a service provider:
 Adoption and global reach. Firms will want to make sure a prospective vendor’s services
are already widely adopted and they have global reach; not just in terms of the technology
they offer, but the client support services.
 Cloud. We are in the midst of an industry shift to Cloud computing and there are a lot of
advantages when you apply this to data aggregation. SaaS solutions now exist that handle
the data collection and normalization process in the Cloud, reducing the burden for clients
of managing locally-installed connections.
 Experience. Firms are under heavy and growing regulatory, reporting and auditing burdens.
Any service provider they choose should be able to meet their regulatory obligations. In
view of the complexity of the financial services industry and its products and practices,
vendors without deep experience in the industry are unlikely to be able to do this.
 Security. Firms need to know not only that they will have access to data whenever they
need it, but also that outsiders will be kept out. Some vendors have had their servers
hacked, a nightmare of the first order for an asset manager, and industry studies have
shown this possibility is the biggest concern for financial services companies considering a
move to Cloud solutions. Related to this is the topic of service up-time. Firms should
review this with vendors to make sure data access is a non-issue.

3. What is the appropriate time to put a solution in place?
Asset managers will face enormous data challenges related to regulation in 2014 and 2015 isn’t
expected to be much different. Advent recommends putting the data infrastructure in place well in
advance of the reporting obligations to allow for unforeseen challenges.
We frequently see regulations requiring new data types that haven’t been tested with the systems
used to consume them. Regulations will also require that firms connect with new financial
institutions and it is important to be mindful of the amount of time involved getting client
authorizations in place as well as efforts related to discovery, development and testing of new
connections. Vendor selection is critical, as the right vendors are well-positioned to guide their
clients through the steps and challenges related to data aggregation.