As asset managers face a barrage of global regulation and compliance demands, one of the biggest challenges they face is knowing who is responsible for the firm's data and where its source is located.
This requires having a proper data governance framework in place to control how and where data moves from source to a range of various outputs required for regulatory and fund distribution purposes.
Of course, this is easier said than done. Data is like water: one can never control exactly where it is going but one can at least funnel the majority of it and know where it's coming from.
"Speaking to the CEO of a US asset management group recently, when I asked how they currently feed data to their distribution partners, they did not know the answer. What we discovered was that in fact no one was doing it. A salesperson had signed a distribution agreement with a platform partner, set the fund products up on the platform and sent the necessary information, but then left it," recalls Lee Godfrey (pictured), Deputy CEO of KNEIP, one of the industry's leading fund data and reporting specialists.
With PRIIPs regulation looming large, control over the accuracy and consistency of fund data is paramount. Not only for regulatory reasons but also for credibility reasons. KNEIP uses the same data that goes to distribution platforms to send out to data vendors and to generate myriad legal and regulatory reports. By helping to control the movement of clients' data, KNEIP is able to improve the efficiency of its clients' sales teams.
"As was the case with one of our clients, not having to spend time explaining such discrepancies can increase a sales team's efficiency by 5 per cent," says Godfrey.
A proper fund governance framework will–when a fund manager knows what the required output is–allow them to reliably source the data to produce the requisite output.
Rather than responding with a kneejerk reaction to each new piece of regulation and throwing the kitchen sink at the problem, proper data ownership simply means adapting the dataset to produce a different output.
"The fund data that we send to Bloomberg, for example, already contains 71% of the data that satisfies the regulatory requirements of the PRIIPs KID," explains Godfrey. "Often an asset manager will bring in one consultant to tell them what the regulation is, then another consultant on how it might impact their business, then another consultant to help them put an RFP together, and yet another consultant to put a solution in place to manage the integration process. If you are smart about the long-term and understand what data you already have, then it should just be a case of developing another output."
Aside from the sales inefficiency, poor data governance can lead to potentially serious fund performance implications. Godfrey refers to one client who uses KNEIP to send out all of its funds' dividend data, but not its dividend payment intervals. In short, the dividend payment interval on data vendor terminals said that the fund paid twice a year when in fact KNEIP was sending them the client dividend data four times a year.
"As a result, the payment interval was incorrect and Bloomberg was only picking up two of the four dividend payments, and the fund's performance was consistently below its benchmark," says Godfrey.
Companies that avoid such issues are those who recognise the need to have a data governance strategy in place and not just a Chief Data Officer because as Godfrey concludes: "You can't centralise data ownership."
