the innovator’s journey: pathways to data dexterity · data movers companies actively moving...

The Innovator’s Journey:Pathways to Data DexterityState Street 2014 Data and Analytics SurveyKey Findings

March 2015

Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research

State Street 2014 Data Survey – The Innovator’s Journey

2

About the Research

Respondents by Assets under Management (%)

Respondents by Country (%)

20

15

1010

10

8

8

55

5 5

United States of America China

France Germany

United Kingdom Australia

Canada Brazil

Hong Kong Singapore

South Africa611

17

1917

12

136

$500 billion or more $250 billion to $499 billion

$100 billion to $249 billion $50 billion to $99 billion

$30 billion to $49 billion $10 billion to $29 billion

$1 billion to $9 billion Less than $1 billion

On behalf of State Street, Longitude conducted a global survey of senior executives at investment firms during October and November 2014. We asked them to self-assess their confidence and progress across six data capabilities, including infrastructure, insight, adaptability, compliance, talent and governance.The 400 respondents were drawn from 11 countries and included insurance companies, private and public pension funds, fund-of-funds, foundations, central banks, endowments, sovereign wealth funds and supranationals.

CORP-1309


Our Analysis Identifies Three Key Groups at Different Stages in the Journey to Data Dexterity

3

Data Starters Companies at an

early stage in their data journey

Data Movers

Companies actively moving toward better

data capabilities

Data Innovators

Companies with advanced data infrastructure,

expertise and high-quality data governance

27%

36%

37%

CORP-1309

Data Starters

Data Movers

Data Innovators

Infrastructure• Incompatible

legacy systems

• Most data in separate silos

• Separate platforms for different asset classes

• Aggregation, visualization, other data management capabilities upgraded

• Improved data integration across investment portfolio

• Infrastructure & tools fully upgraded

• Silos broken down

• Seamless integration of unstructured data

Insight• Limited ability to

generate performance and risk analysis

• Fragmented view by asset class

• Ability to conduct scenario & stress testing across portfolios

• Integrated view of risk & performance across multi-asset portfolios

Adaptability• Capabilities take

much time & effort to adapt to any changes in investment strategy

• Capabilities can adapt quickly to support new products or investment strategies

Compliance• Capabilities can

adapt quickly to support new investment strategies

Talent• Data team can

manage data collection and basic analytics functions

Governance• Basic data

policies and processes in place, but governance is patchy; little standardization

• Data gaps, errors identified; cleaning under way

• Coherent, agreed framework for data governance

• Reduction in time to market for new product additions, or new asset classes

• Systems fully compliant with existing requirements, but slow to adapt to new rules

• Team can manage data collection & integration; some capabilities to perform & manage analytics

• Rich, partly integrated performance & risk analysis in individual asset classes

• Ability to analyze performance & risk of wide range of alternative assets

• Excellent data quality and traceability back to source

• Reporting systems adapt quickly to new requirements across global footprint

• Regular flow of insights; smooth interaction with fund managers

• Team has fully optimized data management; advanced insight generation

• Large degree of standardization across internal databases; external providers aligned

• Strong leadership on data governance; policies & processes entrenched throughout

Note: Above sequencing is illustrative only; milestones may be reached simultaneously or in other sequences.

Our Survey Benchmarked Companies on Six Paths to Innovation

4

CORP-1309

Why Data Innovators Are Pulling Ahead of the Competition

5

The Innovator’s Advantage

1. Robust, tightly integrated data infrastructure

2. Ability to join dots on data yields new insights

3. Adaptive architectures meet new business needs faster

4. Global solutions that are ready for regulatory change

5. World-class data and analytical talent

6. A sophisticated approach to data governance

Key Characteristics Marking Innovators Apart

• Innovators see data and analytics as the single most important strategic priority

• They invest more in technology — and translate this into a competitive advantage

• They can take regulatory compliance in their stride, so technology investments focus on value-adding activity

• They are exploring cutting-edge tools including big data and advanced analytics, and hiring data scientists to drive innovation

Why Starters Get Stuck, and Movers Have Further to Go

• Legacy systems prevent organizations from gaining an integrated view of investment data

• Weak data governance leaves these organizations vulnerable to problems with data integrity and security

• More than half these organizations fear their systems will not keep pace with new regulatory requirements

CORP-1309


Excellence Across These Six Areas Gives the Innovators Much Greater Confidence For the Future

6

Please indicate the level of confidence you have in your institution’s current data capabilities in the following specific areas. (% respondents with very high confidence)

34%

39%

36%

31%

31%

44%

29%

17%

17%

21%

15%

11%

20%

15%

5%

4%

14%

6%

5%

4%

4%

Reducing investment costs across your asset portfolio

Evaluating risk and performance across the entire portfolio

Optimising our electronic trading strategies

Extracting investable insights from a large volume of data

Managing multiple internal and external data streams in varyingformats

Generating forward-looking insights from our data

Conducting comprehensive, accurate scenario and stress testing onour investment portfolio

Starters Movers Innovators

CORP-1309

Who Are the Innovators?

7 Source: State Street 2014 Data and Analytics Survey, conducted by Longitude Research

CORP-1309


Asset Managers Are Farther Along on the Data Journey Than Asset Owners

8

23

38

40

32

35

34

Starter

Mover

Innovator

Asset Owner Asset Manager

• Most asset managers are confident in their data abilities: 40% of asset managers are Data Innovators, versus only 23% who are Data Starters

• Asset owners are less confident: 34% are Data Innovators, almost the same proportion as Data Starters (32%)

Data Starters, Movers and Innovators(% respondents, grouped by asset owners

an asset managers)

CORP-1309


Asset Managers In Detail: Diversified Managers Are The Real Data Innovators

9

21

45

33

21

28

51

34

34

31

Starter

Mover

Innovator

Alternative strategiesHighly diversifiedEquity/fixed income strategies

• Managers offering multi-asset strategies (diversified asset managers) are the most sophisticated asset managers when it comes to using data

• 51% of the managers offering highly diversified strategies are Innovators

Asset Managers as Innovators(% respondents, grouped by different types

of asset managers)

CORP-1309


Asset Owners in Detail: Insurers Are Progressing to Data Mastery, While Pension Funds Are at Earlier Stage in the Journey

10

24

31

45

Starter Mover Innovator

41

38

22

Starter Mover Innovator

Insurance Companies Pension Funds

CORP-1309

Investing in Data


CORP-1309

Everyone is Investing More in Data and Analytics


Which of the following statements best describes your organization’s investment in data and analytics capabilities in the past three years? (% of respondents)

5

17

52

21

5

Investment has remained flat or declinedeach year

Investment has been flat, or increased byless than 5%

Investment has increased each year bybetween 5% and 10%

Investment has increased each year bybetween 10% and 20%

Investment has increased each year bymore than 20% 78%

of investors report growth of 5% or more in

the last three years

CORP-1309

10%

28%

47%

12%

4%

2%

19%

59%

16%

4%

3%

15%

50%

26%

7%

Investment has increased eachyear by more than 20%

Investment has increased eachyear by between 10% and 20%

Investment has increased eachyear by between 5% and 10%

Investment has been flat, orincreased by less than 5%

Investment has remained flat ordeclined each year

1 - Poor / Starter 2 - Medium / Movers

3 - Good / Innovators

… But Innovators Are Investing at a Faster Rate


Which of the following statements best describes your organization’s investment in data and analytics capabilities in the past three years?

38%of Innovators have increased

investment in data by over 10% each year

vs.

17%of Starters who raised

investment at the same rate

CORP-1309


Talent and Advanced Tools Are the Priority – But Governance Issues Must Not Be Neglected

14

1. Quality and availability of data talent

2. Adaptability of systems to new needs

3. Analysis and visualisation of data

4. Data infrastructure

5. Data governance

6. Ability of data systems to keep pace with regulatory requirements

Priority areas of data investment (ranked)

But are investors giving proper attention to the fundamentals?

CORP-1309


Innovators Will Outspend Their Peers Across a Broad Range of Technologies

15

Over the next 3 years, what changes do you expect to the level of investment your institution makes in the following types of technology or data? (% respondents making significant increase)

44%

22%

35%

35%

46%

35%

39%

34%

33%

23%

20%

22%

39%

32%

27%

19%

27%

18%

17%

22%

20%

15%

25%

14%

Data management system

Accounting

Compliance/reporting

Portfolio modeling/ optimisation system

Electronic trading system

Performance analytics

Risk analytics

Order management / execution management systems (OMS/EMS)

Starters Movers Innovators

CORP-1309

Data Strategy and Challenges


CORP-1309

Most Institutional Investors Understand the Value of Data


2

18

34

47

It is a low-level strategic priority(near the bottom)

It is a mid-level strategic priority

It is the most important strategicpriority

It is a high strategic priority (near thetop)

How do most senior leaders at your institution view the importance of investment data and analytics relative to other major strategic priorities?(% of all respondents)

“Our investment in data and analytics capabilities

are a source of competitive advantage for us”

23%43%

Strongly agree

Somewhat agree

CORP-1309

0%

10%

42%

49%

1%

19%

53%

27%

5%

28%

45%

22%

It is a low-level strategic priority (near thebottom)

It is a mid-level strategic priority

It is a high strategic priority (near the top)

It is the most important strategic priority

1 - Poor / Starter 2 - Medium / Movers3 - Good / Innovators

Data and Analytics as Their Top Priority

But Innovators Are More Likely to View This Area as a Top Priority


How do most senior leaders at your institution view the importance of investment data and analytics relative to other major strategic priorities? (% respondents split by clusters)

49%27%

Innovators

Movers

22% Starters

CORP-1309


Shift to New Asset Classes: A Major Driver of Data Management & Strategy

19

1. Expansion into new asset classes (32%)

2. Expansion into new regions (30%)

3. Growing volume of trading data (29%)

4. More stringent risk management standards (29%)

5. Competitive pressure (27%)

6. Increased demands from clients/investors (27%)

Crunch Point?High-quality data on alternative asset classes is not widespread; investors will struggle to identify new sources and providers

Which of the following are most likely to require changes to the way your firm manages investment data over the next 3 years?

CORP-1309

40

50

9 2

Reporting requirements will increase, but our data capabilities will cope adequately

Reporting requirements will increase, and our data capabilities will struggle to cope

Reporting requirements will largely remain unchanged from today

Reporting requirements will ease


Many Believe They Will Struggle to Cope With More Regulation

20

55%Asia-Pacific =

Which of the following statements best characterizes your expectations for regulatory reporting requirements over the next 3 years?

CORP-1309


More Than Half of Starters and Movers Will Struggle to Cope With Evolving Regulatory Reporting Requirements

21

2.1%

4.8%

32.9%

60.3%

1.4%

9.7%

54.9%

34.0%

1.8%

12.7%

64.5%

20.9%

Reporting requirements will ease

Reporting requirements will largely remain unchangedfrom today

Reporting requirements will increase, and our datacapabilities will struggle to cope

Reporting requirements will increase, but our datacapabilities will cope adequately

1 - Poor / Starter 2 - Medium / Movers 3 - Good / Innovators

Which of the following statements best characterizes your expectations for regulatory reporting requirements over the next 3 years?

CORP-1309


Data Security is Paramount – As Is Accuracy

22

36

30

22 21

Security of data Accuracy of data Timeliness ofdata

Ability to extractbroader themes

and forward-looking insights

• 77% believe data security is a key strategic issue for the investment industry

• Recent disclosures (e.g., JP Morgan) suggest they are right

• Legacy systems, siloes and plethora of providers make improving data accuracy a difficult challenge

What do you consider to be the top challenges related to investment data and analytics overall for your business today? (% of respondents)

CORP-1309

19

23

26

27

28

30

31

31

32

Cleaning data

Working with data warehouses thatare too slow

Accessing external data

Integrating legacy systems

Standardising data formats acrossdepartments

Working with data from externalproviders

Cost of external data

Reconciling older data from multipledepartments

Integrating unstructured data

Governance Will Need to be Strong in the Highly Complex Investment Data Environment


What are the toughest data integration challenges your company faces? (% of respondents)

54%“” “The complexity of managing our data

distracts key employees from the areas where

they should be focusing most.”

CORP-1309

How to Become a Data Innovator

Break the “legacy trap” by replacing outdated systems that lock your data in silos

Learn how to exploit unstructured data to drive new sources of insight

Integrate your analytics across the entire investment portfolio to spot new investment opportunities and to identify hidden risks

Embrace outsourced models and the cloud to become more flexible and cost efficient

Crack the compliance challenge with systems that can cope with global regulatory changes

Create compelling career opportunities for data scientists, and learn how to knit them into existing teams

Ensure data governance and security standards are understood by, and entrenched throughout, the organization

24

CORP-1309

This document is for marketing and/or informational purposes only, it does not take into account any investor’s particular investment objectives, strategies or tax

and legal status, nor does it purport to be comprehensive or intended to replace the exercise of a client’s own careful independent review regarding any

corresponding investment decision or review of our products and services prior to making any decision regarding their utilization. This does not constitute

investment, legal, or tax advice and is not a solicitation for products or services or intended to constitute any binding contractual arrangement or commitment by

State Street and/or any subsidiary referenced herein to provide securities services. State Street hereby disclaims all liability, whether arising in contract, tort or

otherwise, for any losses, liabilities, damages, expenses or costs arising, either direct or consequential, from or in connection with the use of this document

and/or the information herein. This document contains certain statements that may be deemed forward-looking statements, which are based on certain

assumptions and analyses made in light of experience and perception of historical trends, current conditions, expected future developments and other factors

believed appropriate in the circumstances.

Risk associated with equity investing includes stock values which may fluctuate in response to the activities of individual companies and general market and

economic conditions. Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates rise bond values and

yields usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed

income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Diversification does not ensure a profit or guarantee against loss.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the

current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. The whole or any part

of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street express written consent. Investing

involves risk including the risk of loss of principal.

Expiration: February 29, 2016

©2015 State Street Corporation – All Rights Reserved

25

CORP-1309

the innovator’s journey: pathways to data dexterity · data movers companies actively moving...

Documents