Data management will top the agenda in 2016, while regulatory fatigue will continue, and back-office outsourcing will increase, Confluence predicts.
Confluence suggests that 2015 saw a shift in the way asset managers approach data management, and that in the wake of regulatory change and more demanding investors, back-office technology has become fragmented.
As asset managers collect more data on their businesses and investment strategies, they are looking to develop more efficient and transparent data models that give a better insight in to their businesses.
Todd Moyer, executive vice president for global business development at Confluence, said: “Our industry has already gone through a transformation sparked by regulatory concerns with managing both systemic and liquidity risk, and that focus has left firms responsible for far more data than ever before."
He added: “In 2016, we predict the asset management industry will see streamlining and optimising their data management processes as a way to reduce risk, manage cost and create new business opportunities."
According to Confluence, data management reform will be at the top of agendas for 2016, as asset managers are on the verge of efficiently managing the data they’re responsible for.
Firms will start to view manual data management as a cost and a liability, and firms will start to restructure data management processes across the whole business. Projects will focus on data consolidation – lowering costs and removing the risks associated with data fragmentation.
Moyer said: "There will be a complete rethinking of industry best practices, associated costs and returns that improved data management will deliver to the firm.”
“Thinking will extend beyond how to meet the next regulatory or investor demand and focus on how to create a sustainable data management model that ensures data flexibility, accessibility and reusability for the long term."
Regulatory fatigue shows no sign of letting up, according to Confluence, as regulators shift their focus towards identifying and managing systemic risk in the market, and towards making sure firms can understand and manage their own liquidity risk.
The regulatory environment has led to new data and technology solutions for asset managers, which is likely to continue.
"The ongoing regulatory push for greater transparency has certainly delivered benefits to the market and investors alike," said Moyer.
"But achieving this level of transparency in the market has required an extensive investment of time and money, and quite frankly there is little sign that those costs won't continue to rise. These regulatory mandates have made inefficient and ineffective data management approaches no longer an option for asset managers."
Finally, less tolerance for self-administered private equity firms will lead to more back-office outsourcing, Confluence predicts.
As use of private equity as an asset class has increased over the last few years, institutional investors are demanding more transparency and more control. This means there will be more pressure on private equity firms to outsource their back-office operations.
Moyer said: "Investors are holding private equity fund managers to a higher standard of transparency and control and there is a decreased level of institutional tolerance to allocate investments to private equity funds that are self administered."
He concluded: "Other third-party service providers are expanding their capabilities to play the same role they do in other asset classes.”
“There are already a few fund administrators responding to this need, but we believe several more solutions will come to market in 2016 and beyond."
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