Data, in many respects, is the lifeblood of the asset management industry. The careful collection, curation, and integration of seemingly disparate data sets allows:
Asset owners to thoughtfully assess target allocation weights and vet investment managers
Active portfolio managers to make confident investment decisions
Passive managers to keep portfolios in line (in time) with their assigned benchmarks
Risk and compliance executives to assess the total portfolio against regulatory and enterprise guidelines
Operations professionals to deliver complete and accurate sets of critical information: NAVs, investable cash projections, security positions, client communications, financial reports, and AUM and flow data
One common, but often overlooked, impediment to the flow of information (and full realization of the value of your firm’s collective intelligence) is the investment data silo.
This post seeks to shine a light on investment data silos:
What are they? Why should I care about them? Where can I find them?
And most importantly: How can I purge my organization of them forever?
What is an investment data silo?
A investment data silo is a collection of investment information isolated from—and not accessible to—other parts of the organization. A rogue repository of critical data that remains isolated in a database/application/spreadsheet/shared drive under the control of one department and separated from the rest of the firm (and outside the enterprise data architecture).
Investment data silos could contain raw data that is not available to anyone, or it could be processed data that is only accessible to the business unit that processed it. Silos are created when departments either deliberately or inadvertently withhold data from other areas within the firm. They can exist when some users have access to (or knowledge of) certain data that others do not. Data silos often multiply with the acquisition of a new investment manager, the launch of new products, the introduction of new investment vehicles, the formation of a specialist department or team, or the implementation of a narrowly targeted (function or asset type) application.
Why should I care?
Investment data silos are risky (and often costly) to asset managers for a variety of reasons:
No comprehensive or enterprise view of data—If your data is siloed, relevant connections between disparate data can easily be missed. Suppose, for example, the compliance or risk management team wants a clear view of firmwide exposures. If the values from the term loan system or the swaps spreadsheet never made it back to the enterprise compliance/risk engine, that task becomes a lot more challenging, if not impossible.
Inefficiency/wasted resources—How many hours does your firm spend supporting reporting cycles, or better yet ad hoc reporting requests, often with manual/excel or macro based queries, cobbling together data from different systems and sources? Not to mention the duplicative human and technical resource costs managing and storing the same data in multiples teams/locations (how many security masters is your firm managing?).
Inconsistent data—With investment data silos, it is common to store the same information in multiple places. When this happens, there is a high probability that you will introduce data inconsistencies. Are you certain the performance and attribution calculations in your portfolio management system (or spreadsheet) match the official numbers published in your client statement or marketing materials?
Real world examples
A large institutional manager consistently found itself engaged in challenging client conversations, as the portfolio manager explained why the performance and attribution figures published on the client statement were not exactly accurate (i.e., they did not match the PM’s calculations).
A large mutual fund complex faced constant overdrafts/idle cash balances as subscription/redemption data was siloed away from portfolio management, making it impossible to achieve timely and accurate cash forecasting.
The head of compliance at a large asset manager was unable to assess concentration limits, as private asset and OTC derivative information was isolated from public market securities holdings, and inaccessible by the enterprise compliance engine.
The risk manager at a global asset manager was unable to evaluate overall issuer exposure for the firm, as investment data for assets managed by sub-advisors was siloed and not available to the enterprise risk system.
The sales team at a mid-sized institutional manager struggled to successfully complete complex RFPs as certain analytics data was contained within investment management, and not integrated with the sales data repository.
What should I do?
At their worst, investment data silos put your firm at risk of making investment decisions based upon less than complete information and reporting to clients, management, and regulators with incomplete or potentially inaccurate information. At best, they are still driving inefficiency and processing risk to your firm, as manual effort and other workarounds are required to support your data aggregation and reporting requirements. You may already know of some investment data silos that your firm is struggling with and should certainly be on the lookout for more. Once identified, tactical fixes (e.g., macros, collaboration tools, emails) may appear to remedy data breaks, but often generate new problems. Stop ignoring these data silos or merely masking the problem with workarounds or point solutions.
Many vendors claim to be the answer to your investment data silo problems, pushing a variety of buzzword heavy solutions—digital transformation, digitalization, cloud-first data management, data lakes, API Strategy—and viable solutions do exist, but investment data silos are generally symptoms or manifestations of larger underlying problems within your organization’s operating, technology or data architectures.
If you’re suffering the effects of investment data silos, we suggest taking a big-picture view and initiating a strategic assessment of your current investment data management capability, with an eye towards identifying and remedying the root cause of your data challenges, before initiating a systems/provider strategy and selection in order to implement a new solution(s) that position your firm for a future free from data silos.