Buy-side looks to EDM solutions to reduce outsourcing risk

Asset managers are looking to reduce issues associated with outsourcing core functions through enterprise data management systems that can bring back select data points to reduce risk and improve efficiency.

Asset managers are looking to reduce issues associated with outsourcing core functions through enterprise data management (EDM) systems that can bring back select data points to reduce risk and improve efficiency.

Steve Engdahl, senior vice president, product strategy for GoldenSource, a company that offers market participants data solutions, including an EDM platform, said asset managers are looking for solutions to address the limits of outsourcing.

He said buy-side firms have in recent years shown a willingness to use EDM platforms to manage key information held by third-party providers, but said there was little desire to bring these systems back in-house.

“There is a concern amongst the buy-side that they have over-outsourced,” he said. “Now, firms want a place where they can pull relevant data together, which makes EDM platforms more attractive for the buy-side.”

One such facility provided by EDM platforms that has gained traction with the buy-side recently is the investment book of record (IBOR), whereby an asset manager can at any time gain a definitive view of total exposures, which can be broken down by product type and region, for instance. 

“The back-office benefits because they can concentrate the data they need from third-party systems and the front-office benefits because they can more easily compile data to set opening positions to inform trading decisions,” he said. 

Another area asset managers are keen to manage data held externally also concerns changes to OTC derivatives trading, clearing and reporting, he said.

Although initiatives like the legal entity identifier were useful, they have not helped the buy-side deal with the concept of hierarchy within the counterparties’ use required to view exposures across products, geographies and counterparty types.

“The reforms and new regulations don’t provide for any hierarchy within counterparty links and this is something buy-side firms in particular want to be able to see clearly and maintain,” he said.

Engdahl added that overall, the buy-side must shift from a focus on quantity to quality with its data systems and processes. Although the shift to ‘big data’ was a major theme for the industry, including asset managers, the area of data governance was more pressing, he said.

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