AssetTech: All Roads Lead to a Data Platform

In this article, Romi Mahajan, CEO, KKM Group and Pulak Sinha, CEO, Pepper, continue from their previous article on the introduction to AssetTech, an emerging space in fintech. Here, the authors discuss the recent developments in this space and the importance of a data platform.

In an earlier piece, we introduced the category “AssetTech.”  In this piece, we want to do a deeper dive into this space.

First, quickly wade into the numbers. Worldwide, a staggering $120 trillion of Assets are “Under Management” by professional firms that specialize in managing and allocating capital. The value of Assets under Management (AUM) is higher than the worldwide GDP. Of this $120 trillion, about 15% is in illiquid and “Secondary” markets.  

Such sums of capital suggest a variety of things:

• • Asset management is a large and complex industry with a multiplicity of firm types and investment opportunities that continue to expand.
  • The asset management industry is subject to ever-increasing regulation.
  • Successful asset management requires the use of tomes of data, proprietary processes, and access to deal flow.
  • The asset management industry must generate high ROI while simultaneously managing risk.

Of course, there are other aspects of the industry, but for this piece, we’ll focus on these four statements.

1. Asset Management and Complexity

With $120 trillion AUM and new asset classes being coined every day, the number of investment options is growing exponentially. Each of these options comes with many variables attached and has to be considered not in its own right but compared to other options. Compound this with the idea that asset management firms have layers of decision-making, professionals with different skills and styles, focused geographical or vertical expertise, and differential access to data, and you have the very definition of complexity. All of this points to both the use of data and the development of a data culture. These, in turn, depend on the right platform and systems to manage data. 

2. Regulation

Regulation is an important factor in asset management. The Wild West concept will not do with such vast sums of money involved and with so many players touching OPM (Other Peoples’ Money). Regulations vary by geography and sub-geography, asset class, volume, timing, fiscal differentiation, and legal frameworks. Regulation has to be in-built into the data platform because what appears to be a great destination for capital allocation has to pass regulatory muster before it is a legitimate option. Once again, all roads lead to a data platform.

3. Data, Data, Data

All roads in asset management lead to data. Asset managers need timely, contextualized, actionable, and comprehensive data with which to make capital allocation and “deal” decisions. That data has to be clean, secure, refined and presented within a timeframe and framework that accords with the decision-making process developed by the firm. Ultimately, this use of data offers the comparative advantage required to compete and, further, constitutes much of the asset managers’ IP stack. Capital allocation, with the myriad choices, has to be based on a judicious combination of experience, instinct, and data.

See More: AssetTech: An Emerging Pillar in FinTechOpens a new window

4. ROI and Risk

The ultimate goal of asset management is to successfully combine two competing strands: ROI and risk management. On the one hand, asset managers look to maximize ROI over time. On the other hand, they look to manage risk so as to avoid large losses or catastrophic swings. Typically, high ROI comes with high risk. Great asset managers steer the shoals between reward and risk masterfully with the use of the right systems, data, and decision-making frameworks.

So while we make the case that asset managers need the right data platform, we owe readers a description of what that platform ought to look like. Here are the non-negotiables:

1. 1. Cloud-native — Cloud architecture allows the platform to be elastic and extensible. It also allows for interoperability and integration. No software platform is designed to be perfect over time, so it has to be extended and improved as context changes. Cloud-nativity is essential to this.
   2. Secure and reliable — When vast sums of money are involved, reliability and up-time are a must. Even more important is security. Data is proprietary, and money is sacrosanct in the industry, so defense-in-depth is table stakes in asset management.
   3.  End-to-end — From sourcing deals on the one end to reporting on the other, the asset management data platform has to cover all relevant workloads and tasks. If not, then silos will remain and defeat the purpose of a platform.
   4. Easy to implement and ease to use — If the asset management data platform requires too much set-up or is not intuitive to use, then adoption will be slow and cumbersome, again defeating the purpose. Adoption is a key to excellence.
   5.  Quick ROI/low time to value — As with any investment, ROI is critical; ROI quickly is even more critical. Asset management is a fast-moving industry, so ROI cannot be measured in 5-year spans; we have to replace years with months or even weeks.

Asset management is an exciting area, and AssetTech is crucial to its longevity and success. Asset managers deserve a high-grade, highly-secure, and high-ROI platform.

Are you using data platforms to manage your assets? What benefits have you seen? Let us know on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window .

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