October 10, 2018
The amount of data produced by users each day is at 2.5 quintillion bytes of data and growing. While that presents significant opportunity for businesses and financial institutions to make more informed decisions, surfacing the data that matters in a timely fashion often stands between true technology-driven optimization and simple data gathering.
Battling the challenges
Financial institutions have begun the optimization process by employing cloud solutions to store data and leveraging technology to improve workflow operations, as discussed in the Bloomberg Buy-Side Forum in Singapore recently; but truly successful implementation has been weighed down by legacy technology systems that are difficult to upgrade and expensive to maintain.
Moreover, with Asia being home to a number of diversified markets, asset classes and counter trade parties, financial institutions in this region also need to grapple with an avalanche of data from different sources. This has resulted in data management being a huge cost, which is why many organizations are scouting for technology applications to help them co-mingle their own proprietary data with data of third parties into one large database.
The other major trend is the growing demand among organizations to incorporate quantitative quality into their research workflow and the need to survive in an environment where there is fierce competition on fees and performance. This has prompted asset management players to expand their headcount for quantitative skill sets and also look for more robust, rigorous and transparent tools to evaluate their research providers and brokers.
Silos present another issue: many of the organizations with in-house technology systems have varying workflows for different departments, which can create friction when introducing a new approach.
Especially in today’s world where there is tremendous pressure on cutting operational costs, firms need new systems that can assist their research and compliance departments to work in a correlated manner, thereby increasing workflow efficiency and transparency.
Finding the right technology models
A major component for organizations to achieve workflow and research optimization is to identify a technology partner that can understand the firm’s requirements and also seamlessly integrate these techniques into the firm’s end to end workflow.
Traditionally, an organization’s research management system is meant to provide the research and data needed to drive investment ideas and strategies; but it’s often primitive and comprised of disparate sources: emails, an order management system, a portfolio management system and an execution management system.
Firms are realizing that in order to organize and disseminate vast amounts of their research, they will have to adopt technical tools that can stitch their individual systems into one single research platform.
For instance, Bloomberg’s research management solution offers an open architecture platform whereby organizations can create their own research environment by integrating their proprietary research and insights with the powerful data, analysis and trading tools of Bloomberg. This helps in connecting the different workflows by bringing all the systems under one roof.
Proprietary data and third-party data is also emerging as a critical component in an organization’s processes. Bloomberg has built a data management solution that enables firms to store information from different sources and move it downstream through the technology systems into the workflow, thereby providing operational leverage and cost savings for the firm.
What the future holds
With the sell side and coverage in the marketplace expected to shrink further, Jamie Coutts, market specialist for buy-side equity at Bloomberg and also speaker at this year’s Buy-Side Forum in Singapore, anticipates that evaluation and performance of external and internal brokers will be a major trend.
This will make research optimization a means to sourcing the best execution for clients by helping to select the most favorable broker to execute a security transaction. Organizations will want to assess the full range and quality of a broker’s offerings which could include value of research, execution capability, commission rate and responsiveness to the portfolio manager.
Previously such metrics were done by spreadsheet, but there are third-party solutions, such as Bloomberg’s broker evaluation solution, that offer accurate budgeting and evaluation tools with heightened capabilities. Using this, portfolio managers can quantify broker performance across multiple asset classes and regions, and also rate brokers’ performance against their peers.
As organizations focus on optimizing the evaluation process in their investment workflow, they will fuel further demand for technology-backed tools to make research optimization more scalable, cost effective and comprehensive.
A Research Management Solution or RMS is a critical element of an asset management firm's technology stack as it applies to the lifecycle of an investment decision; from idea generation, research production and evaluation all the way through to order management, compliance checks and downstream into the post trade or portfolio management workflow.