Skip to content
Thomson Reuters
Asset Management

Finding opportunity in the data jungle

Photographer: Juan Carlos Ulate
Photographer: Juan Carlos Ulate

Data and research have long been an asset manager’s best friend. But, as our expert panel highlight in the latest video roundtable, they will soon bring a higher regulatory-related cost to an already crowded party.

The twin issues of data and compliance have become dauntingly entwined as a result of the European Commission’s MiFID II.

Aid your decision making with Asset Management Solutions from Thomson Reuters

This regulation increases transparency across the EU’s financial markets and standardizes the disclosures required for particular markets.

Watch video — New Realities for Asset Managers — Finding Opportunity in the Data Jungle

But MiFID II isn’t the only regulatory story looming. A new EU regulation on financial benchmarks will also take effect in January 2018.

“The benchmark regulation means that if you have any structured product, or you have any indexed fund, or if you have a passive strategy on the back of an index—now all of that is going to get regulated, and there is a litany of downstream implications for what that means regarding the pricing, and so on,” says Pradeep Menon, Managing Director, Thomson Reuters.

Gain access to trusted news, data, and analytics with Thomson Reuters Asset Management solutions

MiFID II is wide in scope, and includes the “unbundling” of research, a term that comes up often when financial regulatory bodies speak of pathways to more transparent dealings.

advert

Distinct methodology

As of 3 January, 2018, in Europe at least, payment for research can no longer be bundled along with services such as stock trades and paid for using an execution commission.

The idea is that a buy-side portfolio manager, when he or she accepts free research from an analyst, is potentially under the influence of an inducement, thus looking beyond the pure interest of investors in that portfolio.

Roundtable part 1: Finding alpha in a time of lower fees and rising costs

With research costs starting to move into the bright light and no longer going unitemized, decision-making on what to acquire will become more complicated.

“Before MiFID II, it was common to use as many kinds of research providers as possible to get insights,” says Menon. “As an asset manager, you now have to come up with a very distinct methodology, and how you’re going to pay your sell-side broker for corporate access and for research.

“And each shop can be very different in terms of corporate access and client meetings, or analysts’ time.

“But any way you slice it, the regulator is going to walk in and say, ‘What is the methodology, how much are you paying, and where’s that check you’re cutting to pay for it?’ It can no longer be buried in a trade execution cost, or some other cost somewhere else.”

Watch video — New Realities for Asset Managers — How to optimize data costs and still get what you need

Find out more about how Thomson Reuters Eikon can provide you with asset management solutions

Abundance of data

Today’s asset managers are wired to keep costs low and returns high. Informed, selective acquisition of support tools like research and consultations is thus the order of the day.

According to U-Wen Kok, Chief Investment Officer, RS Investments, Developed Markets Group: “Extended success will belong to the management company that is able to manage their costs well to take advantage of the move toward lower-fee products, even as they’re capable of moving across the investment spectrum.”

Roundtable part 2: The art and science of creating a resilient portfolio

“If you’re able to afford large data sets, and if you’re able to afford them without having it hit your margins, you can bring some very strong products to market.”

Gain access to trusted news, data, and analytics with Thomson Reuters Eikon

Menon says what most people are probably thinking when he cites the over-abundance of data as a legitimate business problem.

“Which research report do you read, which recommendations do you read, what kind of data can you ignore? As a data and analytics provider, we need to make sure that you can sift through these various screens and know what you should be reading, and what you should be ignoring.”

Missed the previous videos in this series? See what the panel said about finding alpha and creating a resilient portfolio.

Thomson Reuters Asset Management Solutions provide you with the most comprehensive financial content sets available, to deepen your research capabilities and help you make the most important investment decisions for your customers. These are delivered through its range of flexible technology solutions that allow you to drive efficiency and increase productivity across your business. For more information go to financial.tr.com/am.

Asset management trends in Europe spark lively debate Staying on top of shareholding disclosures Paradise Papers: What new offshore leak reveals about UBO challenge Eikon App Studio: How we built our B2B app platform MiFID II countdown: Will markets be ready? Filling in the LEI gaps for MiFID II advantage Collaboration and the power of an open platform How can RegTech ease the risk management burden? What corporate treasurers need to know about MiFID II Will active funds embrace performance-based fees?