BNY Mellon again sponsored this year's AsianInvestor COO Forum in Singapore, attracting 40+ COOs from Asia’s leading asset management companies. Speakers at the 2nd COO Forum felt that improving their data and technology stood among their top challenges for the future.
This article originally appeared in the June/July 2018 edition of Asian Investor and is reprinted here with permission.
With data analysis becoming increasingly sophisticated as technology advances, asset management companies need to have the right processes in place to maximise the benefits, delegates at AsianInvestor’s 2nd Chief Operating Officer (COO) Forum heard on April 20 in Singapore.
They also need to transcend back-office, front-office, and other organisational divisions, upgrade the skill sets of their staff, and work out how best to deal with tech-empowered regulators, a panel of experts told them.
Figuring out how to glean actionable insights from big data is probably the number one challenge for fund houses, Sanjeev Malik, Asia-Pacific head of technology and operations at BlackRock, said on one of the half-day event’s panels.
“If you have the right data at the right place with the right technology you can get some amazing insights, whether on your client, whether on your products, whether on the market, and it’s amazing,” Malik said.
However, the need for clean data is paramount, especially given the increasing use of data-driven artificial intelligence and machine-learning algorithms. “If the examples are not right, if the data is not right, it’s garbage in and garbage out,” Malik said.
“All data is rubbish until you can derive useful insights from it, so our own challenge is to make sure that what we have is clean,” Andrew Chan, Asia- Pacific COO for Columbia Threadneedle Investments, said on the same panel.
The key is to set up consistent processes where right from the point of data acquisition, whether it’s coming from index providers or exchanges, or its being manually entered, the entire chain of data remains at a high quality, BlackRock’s Malik said.
One way Columbia Threadneedle is using data is to help improve the performance of its portfolio managers.
“We’re trying to understand in using such data how to help portfolio managers become better at generating alpha,” Chan said.
This is especially important with the advent of machine learning and sophisticated pattern recognition in the industry, he added. “Everybody’s going to be able to generate alpha, so a true alpha generator becomes invaluable.”
Francis Braeckevelt, Head of APAC Client Service Delivery at BNY Mellon, noted in an earlier presentation that companies that can best gather and analyse data are likely to be the ones that end up succeeding.
"The Economist said that data is the new oil; I’d go further and say if you refine oil to gasoline or turn it into asphalt the extra value you can offer is quite significant,” he said.
“Data is the same, if you move from the concept of big data to smart data. It is going to be vital to get the right information in the right hands at the right time for the right content,” he noted, pointing to the examples of Uber and AirBnb as new data-rich companies that were valued more than their assetheavy rivals by investors.
Despite the advantages that technology and data can offer Asian asset managers, their impact on regulatory implementation and enforcement in the region can present challenges to the industry.
“With each regulator now enjoying the benefits of cheap technology, they can enforce the rules, they can change the rules, as opposed to say 20 years ago when they had the rules but they had no idea who was doing what,” Columbia Threadneedle’s Chan said.
An upshot of that is that markets are becoming increasingly fragmented.
With monitoring and enforcement made much easier for regulators, each political jurisdiction is able to enforce regulations that promote local firms over foreign fund houses. “The incumbents that dominate are going to keep everybody else out as far as possible,” said Chan.
With the variety of regulatory regimes in the region, asset managers also need to consider the different restrictions on technology, especially in the area of data management.
For example, BlackRock’s proprietary Aladdin system, a risk-management data platform, is unavailable in Korea due to regulatory challenges on data privacy, Malik said.
Despite the focus on technology, other speakers noted that ultimately asset management depends on the quality of the people that operate the business.
“You need to be a good people person. At the end you need to lead, and people need to follow you whether times are tough or easy. You also need to be a talent scout and think of what the person coming to your desk today might be with a couple of years’ training,” said Kenneth Lim, COO for ex-Japan at Nikko Asset Management.
Lim noted that today’s increasingly complex regulatory environment makes it more useful for organisations to centralise the COO role, as they can “add value across many areas”.
Steve Knabl, COO of Swiss Asia Financial, said that his company has had to go another route as it has grown rapidly; namely breaking down the COO role to others. “It started that everything was centralised around me, but my days got longer and at some point I couldn’t do everything and had to choose what to focus on, so I had to hire another person and then another, and those people reported to me,” he said.
He argued that the key is communication with good colleagues. “At the end of the day if you give people responsibilities and listen to them and let them mature and evolve with the firm. They will bring value if you let them.”
But it would be a mistake for COOs to concentrate on technology to the exclusion of other factors. Alan Artyun, head of business operations for Eastspring Investments, said his fund house had introducing BlackRock’s Aladdin platform, as part of a broad technology system shift.
“But the biggest challenge is always about the people,” he added, noting that some roles were becoming redundant while new ones were being created.
“We took a brave decision and said that even if people have been there for 20 years they need to be masters of their own destinies, so we interviewed everybody about our plans,” Artyun told the audience. “They started thinking outside the paddock and began applying for multiple roles, which helped us build enthusiasm.”
Mark Nelligan, head of alternative investment services and structured products for Asia Pacific at BNY Mellon, rounded out the day with a quick-fire analysis of a set of multiple choice questions that that forum’s audience were asked to answer.
Some of the standout highlights included the areas that the audience of COOs felt was a top challenge: 68% of the audience chose regulation and compliance as one of their multiple choices, while 55% included data and technology.
“We haven’t really touched too much on compliance, although I suspect a lot of that is because we have to live with it,” Nelligan said.
In addition, 62% of the audience felt investments into alternatives were part of a longer-term asset shift that fund houses would need to recognise. Nelligan felt this was due to the fact asset owners in the region struggled to put as much capital as they would like into public markets.
“Hence, there is a move into real estate and into infrastructure. There’s a huge demand for infrastructure, not least in this region,” he said.
This article is licensed from AsianInvestor and may include the views of third parties, which do not reflect the views of BNY Mellon or any of its subsidiaries or affiliates. Material contained in this article, which may be considered advertising, (i) is for general information and reference purposes only and is not intended to provide or be construed as legal, tax, accounting, investment, financial or other professional advice on any matter, and is not to be used as such; (ii) does not constitute a recommendation by BNY Mellon (including its subsidiaries and affiliates) of any kind; and (iii) may not be comprehensive or up to date. BNY Mellon (including its subsidiaries and affiliates) makes no guarantee or representation with respect to, and accepts no direct, consequential or any other legal liability whatsoever arising from or connected to, the accuracy, timeliness, completeness, reliability or fitness for a particular purpose of any information contained in this article. BNY Mellon (including its subsidiaries and affiliates) will not be responsible for updating any information contained in this article and the opinions and information contained therein are subject to change without notice. Trademarks, logos and other intellectual property contained in this material belong to their respective owners.
©2018 The Bank of New York Mellon Corporation. All rights reserved.