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Data innovators seize an investment advantage in Asia Pacific
Data and analytics will play a central role in transforming the financial industry in Asia Pacific (APAC) as investment organizations, including asset managers, insurers and pension funds adapt to the emergence of new investment strategies, increasing demands from clients and a rising tide of regulation.
Ian Martin 28 May 2015
 
   
Data and analytics will play a central role in transforming the financial industry in Asia Pacific (APAC) as investment organizations, including asset managers, insurers and pension funds adapt to the emergence of new investment strategies, increasing demands from clients and a rising tide of regulation.
 
In the years ahead, data and analytics will become one of the top strategic priorities for investors as they seek advanced technologies that can help boost their investment performance. The outlook is confirmed by a new State Street survey of 400 senior executives at investment firms globally, conducted by Longitude Research. Among the respondents, 130 are based in APAC,
 
More than three quarters (77%) of APAC respondents see data and analytics investment as either their most important or a high-level strategic priority. Nearly 4 out of 5 of them (78%) plan to invest more in their data management systems over the next three years.
                                                                                      
Already, companies with the most advanced data practices are gaining a huge competitive advantage over their rivals. These innovative investors can analyze risk and performance across today’s complex multi-asset portfolios. They have systems that streamline compliance and enable them to adapt rapidly to new stakeholder demands.
 
Globally, companies are at different stages in the journey towards advanced data capabilities. More than a quarter of respondents (27%) are classed as Data Starters or organizations that are just beginning to modernize their data infrastructures and strategies for the age of data-driven investing.
 
Just over a third of respondents (36%) qualify as Data Movers, who are beginning to invest aggressively in data and analytics capabilities. Then there are the Data Innovators, organizations that have invested heavily in this area and already demonstrate advanced data capabilities and skills.
 
There are Data Innovators in most areas of the industry, but asset managers tend to be more confident in harnessing their data for actionable insight than asset owners. Pension funds are typically at an early stage of their data journey while insurers are progressing to “data mastery.”
 
Intensifying competition in the asset management industry in APAC is one of the main factors driving asset managers to innovate. In particular, the potential for technology companies such as Alibaba Group to take a bigger slice of the pie in investment management suggests that data and analytics could become the industry’s next competitive battleground.
 
Asset managers are also transforming their data capabilities to meet the increasingly sophisticated demands of their clients. Indeed, our survey indicates that diversified asset managers — including those offering multi-asset strategies — are the most sophisticated users of data in the asset management space.
 
Looking specifically at APAC, expansion into new asset classes and more stringent risk management standards are viewed as the top drivers of change in the way investment organizations manage their data.
 
Increasing demands from clients and investors (cited by 32% of respondents), expanding into new regions (32%), managing the growing volume of trading data (29%), increasing threats to cyber security (29%) and competitive pressures (26%) will also prompt changes in the way they manage investment data in the next three years.
 
The growing popularity of multi-asset investment strategies, which may combine equities and bonds with a range of alternatives, has made it harder for companies to track risk and performance across the portfolio.
 
Investors say they value the ability to generate as well as achieve an integrated and insightful view of investment performance and risk across their entire portfolios. The aim is to have a platform where investors can have a full view of their entire portfolios, and can test innovative ideas in real time.
 
Investors will show more willingness to trade when they know why they are trading and the risks involved. Currently, the danger is that investors become paralyzed because they don’t understand the risks. Increased activity without productivity isn’t good, but more liquidity in the market would be beneficial.
 
Many expect global reporting requirements will increase over the next three years. And the need for systems that can adapt to changes in regulatory requirements across multiple jurisdictions is a high priority. More than half of APAC-based respondents (55%) say that their data capabilities will struggle to cope with the change. This figure compares with 50% of respondents globally, underscoring the challenge faced by APAC organisations in keeping pace with regulation.
 
In our global survey, we find many Data Innovators see data and analytics as their single most important strategic priority. They have a robust, tightly integrated data infrastructure and the ability to connect dots on data to yield new insights.
 
Data Innovators can take regulatory compliance in their stride and are equipped with global solutions that are ready for evolving regulations. They have adaptive architectures to meet new business needs faster. Crucially, the innovative investors are exploring cutting-edge tools including big data and advanced analytics, and are hiring data scientists to drive innovation.
 
The ultimate goal for investors is to become agile with their data — harnessing a broader range of data sources, mining that data to unlock new sources of insight, and using those insights to accelerate business performance. APAC’s Data Innovators are investing aggressively to achieve the data capabilities that will enable them to stay at the forefront of this fast-changing market.
 
Ian Martin is executive vice president and Asia-Pacific head of State Street Global Markets and State Street Global Exchange.
 
 
 
 

  

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