Data skills slow to develop inside asset management firms as budgets tighten
Asset managers are lagging behind in developing their data capabilities, which they say are crucial to improving investment returns and cutting costs, finds asset management consultancy Alpha FMC.
On average less than 1 per cent of staff within asset management firms have data management skills. Over two thirds (69 per cent) of firms do not have, and do not plan to hire, a Chief Data Officer.
Nevertheless, most asset managers, particularly the larger firms, have ambitions to innovate through better data governance and to generate insights by leveraging advanced data analytics.
This is significant because asset managers are using more financial and non-financial data flows from more sources than ever online to inform decisions about their positioning, which means they must find ways to manage this deluge of data. There are also efficiency benefits that many hope to harness by using more advanced artificial intelligence and machine learning techniques.
“Having access to better data across the value chain is becoming an urgent trend in the investment industry. Large asset managers are on the offensive with data, and, without significant investment, small and mid-sized firms risk being left behind,” explains Olivia Vinden, director at Alpha FMC.
The study of 33 asset managers with a combined AUM of GBP6.9 trillion shows that low staffing levels, lack of senior oversight, and budget constraints are hampering development.
Larger asset managers with over GBP250 million in AUM tend to have more sophisticated data capabilities, often employing more than twice the number of data management staff than small and medium sized firms, and nearly a fifth (18 per cent) having appointed a Chief Data Officer.
This compares to small firms, which are mostly still in the early stages of defining their overall data strategy. This reflects in their hiring plans, with almost two thirds (64 per cent) looking to hire more data architects. A similar number (67 per cent) of medium sized firms are hiring data engineers, as they move applications to the cloud and focusing on data integration. Meanwhile, the big players appear to be much further along, and are now looking to hire data science (45 per cent) and governance (27 per cent) experts to develop ways of generating insights from data.
Overall, almost half (48 per cent) of asset managers say responsibility for data management is still siloed by individual business functions, a figure which increases to 73 per cent among smaller players.
Vinden adds: “Against a backdrop of market uncertainty, the industry is bracing itself with defensive investment strategies. Our research indicates a significant shift is taking place as firms recognise that an offensive data strategy – that is, an approach where data drives core business objectives – is needed to capture growth in competitive times.
“It is concerning that responsibility for data remains siloed, particularly amongst smaller firms. Data programmes work best with strong senior leadership, executive buy in across the business, and a holistic approach that encompasses the whole business.”
One in ten (10 per cent) firms with senior managers say they have not really considered the subject of data governance, compared to 42 per cent of firms, where data governance is a concern across the whole business.
Budget constraints are the biggest obstacle faced by asset managers when it comes to hiring data expertise, cited by 50 per cent of respondents. Since data resources are often required on an intermittent or ad hoc basis, 30 per cent of respondents say they do not have sufficient existing infrastructure to justify hiring more data expertise.
Emma Haffenden, senior manager at Alpha FMC, adds: “It is interesting that skills shortage is currently seen as a barrier to cultivating data expertise by only 7 per cent of respondents. This puts those who do have the budget and the scope to hire now at a first mover advantage. The market resource gap may increase in the short term as asset managers increasingly focus on hiring and retaining skilled staff.
“Budgetary constraints on hiring data expertise are slowing firms down, as is a lack of senior ownership. Individual department concerns take precedence over the less immediate, but in the long term crucial, need for an enterprise wide data strategy.”