Some 60 percent of institutional investors surveyed plan to partly or fully outsource their data management over the next three years, according to a survey conducted by State Street.
Currently, 52 percent conduct all of their data management functions in house, however, by 2021, this is expected to drop to 36 percent with 15 percent aiming to fully outsource this function to an external partner.
More than half of survey respondents (57 percent) cite the driver behind this change in data management as demands from regulators.
However, it also appears that data [management] is rapidly becoming increasingly important to institutional investors with 30 percent stating that the incorporation of new information insights, or alternative data into their investment process, will be one of the strongest opportunities to help increase assets for their firm over the next five years.
In addition, almost half (46 percent) of respondents said the implementation of a better data strategy has improved the alignment of their investment and risk teams, while 22 percent stated their data and analytics capabilities have become their most important competitive advantage.
The survey also found that 43 percent of institutional investors consider the lack of integration between different data sources and types as a top data management challenge.
Five years ago, State Street found 91 percent of respondents said they had all or most of the right talent in place to advance investment data and analytics strategy. Today, this figure has fallen to 60 percent.
Over the next five years, 43 percent of respondents said they expect to rely on external partners as their source of performance and risk analytics.
A further 68 percent of institutional investors stated they feel comfortable storing data on the cloud.
David Pagliaro, head of State Street Global Exchange for Europe, Middle East and Africa, said: “In an environment of increasing regulatory requirements, and with low yields necessitating investors to look into alternative—and often more complex—sources of alpha, it seems clear that institutional investors will continue to prioritise data management and analytics to make better investment decisions, meet regulatory requirements, and gain competitive advantage.”
He added: “It appears the natural and most effective next stage of this technological evolution is for institutional investors to partner with data and analytics specialists, allowing them to focus on their core competencies.”
Subbiah Subramanian, global head of State Street Global Exchange’s data-as-a-service offering, DataGX(SM), commented: “Explosion in data complexity has fundamentally changed the way asset owners and asset managers compete and operate.”
He added: “Today’s investment climate requires an overwhelming amount of data, and as the lines between front, middle and back office continue to blur, smarter data management is absolutely essential for effective performance and recognising growth opportunities.”
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