Creating reliable and robust data and managing it accurately and efficiently tends to be a routine activity for banks. But institutional investors and asset managers have historically lagged their sell-side counterparts on this front.
Yet Singapore's DBS Asset Management seems to be ahead of the curve compared to many of its Asia-based peers. One reason may be that the firm is said to be close to partnering or merging with another fund house – potentially Nikko Asset Management – to boost its scale and reach.
DBS AM is switching to Eagle Investment Systems' data-management solution. It previously used Thomson Reuters' Portia, an industry-standard solution that has performed very well, says chief operating officer Michael Syn. The fund manager reviewed four or five systems before choosing Massachusetts-based Eagle, which provides a particularly good fit with DBS's future plans, he adds.
The asset manager finished specifying its requirements with Eagle in August and will start a parallel run of the old and new systems in the fourth quarter into the first quarter next year, with a view to going live in the second quarter.
As DBS AM expands multi-locally and with multi-strategies, data management provides a centralised framework for all trading, clearing and risk-related activity, providing the essential link between multiple front- and back-office operations, says Syn.
“Having a reliable single data-management engine lowers our operating exposure from data errors and frees our back-office staff to perform high valued-added, client-service, 'middle-office' activity,” he tells AsianInvestor.
"You probably can’t usefully manage a multi-strategy multi-local investment management operation using [Microsoft] Excel,” he adds.
Moreover, a tight focus on data management implicitly forces movement to straight-through processing and auto-reconciliation, argues Syn. “More fundamentally, it enables scalability, because at the scale we intend to compete at, back-office capabilities become increasingly commoditised.”
DBS AM faces numerous data-management challenges, he notes. One is operating in multiple time zones, with issues including cut (contract expiry) times, reference data, market closes, option cuts and fixings/resets.
“When you start dealing with very liquid assets, you’re not just looking at a date, but a time,” he says. “Exchanges close at different times; Libor, Jibor, Hibor all come in at different times. All this is a big data management challenge.”
Other challenges include counterparty management – covering issues like booking entry, data refresh, option exercises, documentation term matching, and delivery terms. Moreover, firms need to be able to consolidate multiple data formats for multiple balance-sheet types; if not, they lose the value of clearer/prime-broker diversification. "What's the point of diversifying if you can't manage your whole portfolio in one?" he adds.
Syn also cites other capabilities that Eagle provides, such as a single balance-sheet view per product. That is, providing a view of long/short cash per currency across each sub-balance sheet, of cash reconciliation and of cash drag, in the form of onshore/offshore funding, margin calls and funding. The new system also provides a view of consolidated counterparty risk for DBS AM's business as a whole.
For example, a firm that manages a fund that incorporates exposure to different countries needs to be able to manage data from different "onshore balance sheets", says Syn.
As for the progress made on implementation, the asset manager has already integrated its order management system and broker and balance-sheet feeds to the database. Still to come are strengthening of transaction processing, and exception handling for amendments anywhere in the transaction-processing chain. Syn says this will reduce the occurrence of errors and the need for amendments post-trade or post-corporate-action or post-reset or post-event.
Eagle’s data and accounting engines are important in helping DBS AM achieve all these goals, he adds. Moreover, the software will enhance DBS AM's capabilities for risk measurement and performance attribution, he says.
As data usage becomes more complex and 'under the hood' – for example, bootstrapping from a credit spread curve or volatility surface, or implying correlation sets – then “cut-and-paste risk measures” become less robust and less reliable, says Syn. “This probably isn’t something the traditional asset-management houses have a good handle on yet,” he adds.
Operational risk will need to be mitigated through workflow automation, intelligent exception handling and a standardised data-management process – all of which Eagle has considerable experience and capabilities in, says Syn.
DBS AM should be well supported on the ground, as Eagle – part of the BNY Mellon group – has been expanding its regional presence since late last year. Other Eagle clients in the region include Japan's Nomura Asset Management and the Queensland Investment Corporation in Australia.
John Legrand, managing director of Eagle's Asia-Pacific and European, Middle East and Africa (Emea) operations, moved to Singapore in August from London to manage the company's first office in Asia, which was set up late last year.
Legrand continues to look after Emea as well as Asia-Pacific. Following his relocation, Eagle said it would expand its London team to reflect continued business demand from Emea-based companies.
The operations manager article in the upcoming (November) issue of AsianInvestor will feature Michael Syn.