The term ‘futureproofing’ is often thrown around but drilling down into the specifics of what the idea actually looks like is important. This sentiment was echoed by Marc Mallet, Global Head of Platform Strategy, Northern Trust Corporation, at a recent panel discussion.
Mallett was speaking in a webinar titled, “Who is actually in control: Understanding investment risk, challenges, and solutions for asset owners and insurance professionals”, which featured in a new report, “Effective investment risk and data management for asset owners and insurance professionals”, published by Clear Path Analysis in conjunction with Rimes Technologies.
Mallett spoke alongside other senior figures from Vermont State Pension, FactSet, and Triangle Life. He was asked how asset servicers are configuring offerings to meet client needs – especially when it comes to ensuring that data is consistent, finalised, and actionable.
Mallet noted that the main issue insurance investment teams face is the volume of data they receive daily compared to the size of their team. This inconsistency creates difficulties, which lead to teams making hard choices about which information to prioritise and where to allocate their time and energy.
“When considering the complexity of the macro environment, investment
systems need to present more data points faster."
The current market – with high inflation and rising interest rates – hasn’t helped. Many are switching up their investment strategies to capitalise on new opportunities, which means they need to sort through new data points at a faster pace.
“When considering the complexity of the macro environment with the constantly increasing feed of real time information and geopolitical events, investment systems need to present more data points faster,” said Calvin Johns, Northern Trust’s Manager of Emerging Solutions, in a 2022 paper on the Cloud.
Reducing data silos and increasing the frequency of updates to combined data sets was paramount, he said. “These data sets might include portfolio accounting, time series data such as price and yield, and security master data, which then must be combined with other sources such as fundamental balance sheet data about the issuer, and even some unstructured data regarding issuer industry sector expenditures.”
A September 2022 Blackrock study on futureproofing for insurance investment portfolios said that 68% of respondents were prioritising investment in technology for risk management at scale. “[There is a] growing adoption of fixed income ETFs to help manage liquidity and seek enhanced yield,” said the report, adding that “79% of insurers surveyed plan to review their long-term strategic asset allocation (SAA).”
“You hear about these trillion-dollar asset managers and assume
they must be the most complex."
Mallett said that, for him, futureproofing means his organisation has investigated ways to maintain staff involvement in key processes – so that they can focus on value-adding tasks and minimise busy work. “We are seeing [this trend] across the industry, whether it be with foundations, endowments, public funds, or family offices,” he said on the topic of resource allocation.
Mallet added that he felt the industry often confused size for complexity. “You hear about these trillion-dollar asset managers and assume they must be the most complex,” he continued.
However, insurers, pension funds, and other asset owners typically do invest across the entire spectrum, Mallet said. “They are exposed globally to alternatives – which could be through private equity, hedge funds, or direct investments in real estate or infrastructure projects,” he added.
Instead, Mallet said his team believed the industry had done a bad job of supporting these companies, particularly the ones that were smaller and more “resource-constrained”. “On a small team, one is expected to do everything from managing the investment process, to operations and data management, to both internal and external reporting,” he said.
Solutions to the issues of strapped resources and teams are necessary now, Mallet said. He noted that new platforms are being launched to ease burdens – and new technology helps too.
When it comes to futureproofing, Mallet said his organisation was utilising Cloud-native platforms to solve some of the problems. “The platform was the first public Cloud-native application that Northern Trust brought to market,” he said. “It’s designed to support the Chief Investment Officer and investment office by easing the burden of data-wrangling.”
“Clients are looking for technology-enabled service
provisions.”
Mallet added that there are too many stories of investment professionals spending the first part of their days “data-wrangling”. “By combining technology with service, you can alleviate this burden,” he continued.
Other panellists in the debate mentioned that manager evaluation takes a lot of time – and having a platform that integrates information on prospective and existing managers is key. The goal is that allocation decisions be seamlessly integrated with the necessary technology. “The integration of process and data is important,” Mallet said. “Clients are looking for technology-enabled service provisions.”
Full-blown outsourcing isn’t always the answer, said Mallet, but the option to take services from providers when it makes sense and align them with everyday processes is key.
