Clients are using custodians and administrators to source a single set of data to feed processes across applications and platforms, Mercer Sentinel principal Tricia Nguyen says.
“Custodians and fund managers typically source or retrieve asset data from multiple vendors to populate a single data record to be [used] for different purposes, [such as] fund accounting, performance reporting, etc,” Nguyen explains. A single data set would ensure consistent quality across the various platforms and uses, and reduce the need to reconcile data, she says.
She notes that Mercer Sentinel has seen cases where clients have wanted an external vendor to manage and navigate data for a required outcome, making a single data set more difficult to achieve.
“This may well have contributed to recent developments where we have seen the emergence of standalone data solutions by some service providers to try to accommodate clients’ specific needs,” Nguyen says.
When asset owners or managers use multiple vendors to manage data, they need to establish governance structures to oversee the relationships and reconcile data sets between the standalone provider and the data the custodian or administrator provides.
Beyond such questions around governance structures, there are other decisions clients must make before choosing how to manage data. There are several options.
“Various key aspects to consider include the significant cost of a data solution, as there are build costs, maintenance costs and data-hosting costs, along with change-management costs,” Nguyen says. “Alternatively, asset owners and asset managers may have internal databases, which may have [implications for resourcing and depend on key people for] maintenance and updates.
“Outsourcing the datahosting services to a custodian is another option but this also bears cost implications and further embeds the clients into their outsourced service arrangement, which may give rise to other relevant considerations.”
Regulatory developments, such as RG 97, and an increased focus on data transparency have “arguably” contributed to the push for a single source of truth in data management, Nguyen says.
“Top-down regulatory sentiments around data transparency have been reflected in greater demand and increased complexity in requirements around data navigation and management,” Nguyen says. “In a fiduciary capacity, the onus, therefore, is on being able to reconcile the underlying data and demonstrate a consistent set of underlying data records,” despite diverse applications.
The key to managing a single source of truth when it comes to data is to treat data as an enterprise asset, Nguyen says.
“This requires ongoing monitoring under a clear governance framework that involves relevant stakeholders within the business via clearly defined responsibility in terms of managing the end- to-end data flow through the investment cycle,” she says. “There must be alignment in terms of consistency of the underlying data source.
“Notably, strong oversight, access and interaction at the senior management level underpin a robust governance framework, and a robust governance framework is especially pertinent in terms of proactively tracking any initiatives [for a data- management offering], to ensure timely and effective escalation for issues resolution.”
Rachel Alembakis has more than a decade of experience writing about institutional investments, asset owners, custody and administration for a variety of publications.
This article originally appeared in Investment Magazine.
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