Majority of North American fund managers struggle to access high-quality data, study shows

By Gaia Lamperti

New research involving fund managers in North America who collectively manage around $600 billion, reveals they are placing a growing emphasis on both the quality of the data used in their investment processes and on having access to the technological capabilities to efficiently process data. Six out of ten (60%) believe this is crucial to achieving above-average returns in the future.

The study ‘Financial Data Impact Report 2022‘, which was commissioned by quant technologies provider SigTech, found that 94% of fund managers find the process of evaluating data, ensuring it meets quality standards and negotiating with data vendors challenging. 72% say it is difficult to source data that is cleaned, validated and ready to use from vendors.

When it comes to onboarding new data sets, nearly six out of ten North American fund managers say they encounter problems, with 56% saying it takes between 1 and 6 months to have new data fully operational internally.

As a result of the many challenges North American fund managers encounter when sourcing and managing data, 64% expect to increase their budget in this area over the next few years.

“Fund managers are becoming more reliant on quality data to support their increasingly sophisticated investment strategies. With rising costs to source and manage data, fund managers are increasingly seeking outsourcing solutions with specialist service providers that enable them to focus on their core activities of taking investment decisions,” commented Daniel Leveau, VP Investor Solutions at SigTech. “However, our findings reveal there is significant room for improvement in the quality of data provided to quant fund managers, which represents a huge opportunity for vendors and technology providers to offer data that is clean, validated and operationally ready.”

When asked to pick the two asset classes where they encounter the greatest difficulty in accessing high-quality data, 62% of North American fund managers cited fixed income, followed by 54% who selected commodities. In terms of the two financial instruments where they have the greatest difficulty in securing high-quality data, 66% cited forwards, followed by cash/spot (58%) and then futures (40%)

In terms of outsourcing of data services, the study found that 64% of fund managers have increased their level of outsourcing over the last two years. Going forward, 77% plan to outsource more between now and 2024, with none seeing a decrease. When asked which factors are fuelling the growing trend towards data services outsourcing, a shortage of qualified in-house subject matter experts and resources was cited as the biggest driver.

Half of those surveyed (50%) found negotiating with data vendors the most frustrating part of the data onboarding process, and 60% say that evaluating the different vendors is challenging.

As available data sources are becoming increasingly specialised and varied, fund managers are increasing their levels of outsourcing data services. A shortage of qualified in-house subject matter experts is seen as the biggest driver of this trend,” Leveau added. “For quantitative portfolio managers to stay competitive and continue to generate superior investment results, continuous investment in new data sources and technology is vital.”