The Importance of Data Asset Management: Insights and Trends

Why data is the foundation of all strategic decisions?

As traditional funds, alternative funds, hedge funds, and private market funds navigate the complexities of market volatility, regulatory requirements, and the need to safeguard investor interests, the importance of data accuracy and reliability can’t be overstated.

The asset management industry finds itself at a critical juncture where effective data asset management is no longer a luxury but a necessity for survival and success.

To understand the moment in more detail, IVP recently conducted a poll among industry experts who attended a recent data management webinar series. The results reveal the industry’s changing attitudes about data asset management, emphasizing its necessity for operational survival and success.

The Significance of Data Asset Management

The asset management industry continues to expand with global AUM projected to reach an astounding $145.4 trillion by 2025^[1]. As a result, both the volume and complexity of data that asset managers must process and analyze have increased exponentially.

The poll underscores the critical nature of data asset management with an overwhelming 66.67% of respondents ranking its importance as “high” and affirming that data assets are key to the business.

This sentiment is echoed by industry leaders who recognize that effective data asset management is essential for driving operational efficiency, enhancing risk management, and unlocking new opportunities for growth. For example, a study by Markets and Markets projects that the global master data management (MDM) market will grow from $16.7 billion in 2022 to $34.5 billion by 2027 at a compound annual growth rate (CAGR) of 15.7%.^[2]

Let’s look at some key trends that emerged from our poll results.

Four Key Trends

The poll results make it clear that the industry is shifting toward more sophisticated data management frameworks in order to enhance operational efficiency, compliance, and decision-making . Four trends that emerge include:

1. Unified Security and Reference Data Management

One of the biggest challenges asset managers face is security and reference data. When asked about their current approach to security and reference data, the vast majority (87.5% of respondents) indicated they build a single, dedicated security master in-house. This emphasizes the industry’s focus on developing a custom approach to managing data for . Only 12.50% of respondents said each function maintains its own security data. This makes sense, given that a fragmented approach to security and reference data management often leads to inconsistencies, duplication of effort, and increased operational risks.

2. Easy Modeling for New Asset Classes

The poll asked respondents how easy it is to model a new asset class in their current system, given that this can be a major hurdle for asset managers seeking to enter new markets, expand offerings and stay competitive. In this case, 87.5% of respondents who have a dedicated security master found it fairly easy to model new asset classes with very little or a manageable amount of coding. This result lends credence to both the agility and the importance of these dedicated systems.

3. Centralized Management of Legal Entity Data

Effective management of legal entity data, including portfolio, counterparty, and other related information, is critical for ensuring compliance, mitigating risks, and facilitating smooth operations. While 87.5% of respondents use a centralized system for managing legal entity data, 12.5% still lack such a system, potentially exposing their organizations to operational and regulatory risks. In fact, a study by WBR found that 54% of leaders in financial institutions consider data silos to be the main obstacle to innovation and growth^[3]. Data silos occur when different departments within an organization collect, store, and manage data independently, using separate approaches, without a centralized data asset management solution. Silos like this lead to an incomplete understanding of the business and hinder effective decision-making.

4. Approval Mechanisms for Legal Entity Data

Our poll results highlight a significant gap in the adoption of approval mechanisms for legal entity data. While 42.86% of respondents have workflow tools in place for approvals, a majority (57.14%) do not have any approval processes in place at all. This lack of governance for such an important data set could raise the risk of inconsistencies, operational risks, and compliance issues. Robust approval mechanisms are essential for maintaining data integrity, ensuring accountability, and facilitating smooth operations. Asset managers should prioritize the adoption of workflow tools or other approval processes to streamline legal entity data asset management and mitigate associated risks.

Data Remains a Critical Asset

The results of our poll underscore the growing importance of effective data management. As the volume and complexity of data continues to increase, asset managers must adopt innovative solutions and best practices to overcome the challenges of fragmented data management, inflexible systems, and inadequate governance.

Ultimately, the significance of data in shaping the future of asset management can’t be underestimated. The insights obtained from our poll serve as a roadmap firms can follow to transform data into a truly strategic asset, one that helps asset managers survive but also thrive in an increasingly competitive environment.

At IVP, we are committed to helping asset managers navigate the complexities of data asset management with practical solutions tailored to specific needs. Our comprehensive suite of solutions covers master data management (MDM), entity & reference data management, portfolio management, reconciliation, regulatory reporting, treasury and cash management, and expense management, all of which empowers firms to optimize operations, mitigate risks, and drive sustainable growth.

Click here to learn more about IVP’s Master Data Management platform (MDM) or contact us.

References:

1. Global Assets under Management set to rise to $145.4 trillion by 2025, PWC
2. Master Data Management Market, MarketsandMarkets
3. Empowering Line of Business Users Through Data Democratization, WBR