State Street Corporation, a Boston-based financial services and bank holding company, has revealed that over half of institutional investors plan to partly or fully outsource their data management over the next three years, according to a survey sponsored by the bank.
While 60% of the survey participants plan to outsource data management over the next three years, 52% are currently conducting all of their data management functions in-house. This number is expected to fall to 36% by 2021, with 15% aiming to fully outsource this function to an external partner.
Subbiah Subramanian, global head of State Street Global Exchange’s data-as-a-service offering DataGX(SM), commented on the results:
“Explosion in data complexity has fundamentally changed the way asset owners and asset managers compete and operate. 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 recognizing growth opportunities.
More than half of survey respondents (57%) cite the driver behind this change in data management as demands from regulators.
Increasingly complex regulatory requirements regarding data management are the main driver for the new wave of outsourcing, according to 57% respondents. The progressive importance of data management for institutional investors is also driving the trend.
30% of respondents state 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.
The implementation of a better data strategy has improved the alignment of 46% of respondents’ investment and risk teams data and analytics capabilities have become their most important competitive advantage for 22% of those surveyed.
David Pagliaro, head of State Street Global Exchange, EMEA, commented:
“In an environment of increasing regulatory requirements, and with low yields necessitating investors to look into an alternative – and often more complex – sources of alpha, it seems clear that institutional investors will continue to prioritize data management and analytics to make better investment decisions, meet regulatory requirements, and gain competitive advantage. 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”.
In 2013, 91% of respondents said they had all or most of the right talent in place to advance investment data and analytics strategy. The figure has fallen to 60% in the recently released survey.
Over the next five years, 43% of respondents expect to rely on external partners as their source of performance and risk analytics and 68% of institutional investors feel comfortable storing data on the cloud
