Data Differentiation for Hedge Fund Managers and Administrators

transparency

As I recently discussed in a Preqin special report, A Continued Desire for Transparency, over the last four years in the alternative and hedge fund space, reporting has gone from minimal to quite significant with no end in sight.

This expansion is due largely to increased regulatory focus. Because of that, there has been a fundamental shift in the way that firms are required to manage their data, and we have reached a tipping point where asset managers’ abilities to effectively manage the volume and complexity of the data is differentiating them from the rest of the crowd. Firms must evaluate their current system(s) to figure out how to better handle that data.

If you look at most regulations, much of the data that asset managers must now report is consistent across regulations. In many cases, up to 70 percent of the data needed to meet a specific regulatory reporting obligation has already been sourced for complying with a different regulatory demand. In those cases, it is only logical that asset managers would want to be able to leverage the data that already sits within their systems and reuse it rather than source the same data over and over again. Smart data reuse allows firms to ease the regulatory reporting burden and continue to drive ahead of the fast pace of regulatory changes.

One of the terms I hear regularly now is “Regulatory Technology” or “RegTech,” which is all about enabling firms to leverage technology in order to manage data and meet the challenges that regulatory agencies are putting on them globally. This has been largely driven by the regulatory focus on managing systemic risk and since we don’t see that trend slowing, embracing RegTech is paramount to meet this ever-changing need for data management and data re-use.

Whether it is transparency into fees, underlying risk or investments, there is going to be a continued desire for transparency, high levels of efficiency and accuracy – all of which result in heightened data management challenges.

I believe that the way firms embrace technology to assist in managing their business data will separate the winners from the losers. Similarly, the firms that embrace transparency – both from the regulatory side of things and also from the investors’ point-of-view – are going to be the most successful in attracting assets over the long term.

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