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Winning the Data Race

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This article was originally posted in The Drawdown.

Daniel Trentacosta, managing director and head of private markets and change at MUFG Investor Services, explains how a collaborative approach to harnessing new technology unlocks clients’ potential

Why must firms adapt to new technology? What do they risk by moving too slowly?

Daniel Trentacosta: There is a race to manage data, and anything that makes data more accessible and useful will provide a competitive edge. 

Fund managers are dealing with many issues today: geopolitical unrest, new government leadership in the US, interest rate volatility, and we have regulatory environments that seemingly change by the second. There is a lot of pressure on managers that isn’t going away.

So, we are intensely focused on technology and making processes more efficient. A great deal of that work centres on improving data as a service and providing easier, direct access to data. Fund managers who are slow to improve their systems risk missing out on opportunities that could enhance their bottom line, or they potentially could make an avoidable mistake if they store data in an unstructured way that is not easy to access and evaluate.

At the same time, global regulators are requiring more disclosure and transparency, and they want a wide range of data in a variety of formats across jurisdictions. We monitor these changes very closely. It’s critical that we structure and store volumes of data in systems that help fund managers comply with the changing regulations and submit reports efficiently.

What does this mean in a practical sense for businesses? 

Trentacosta: The more streamlined and organised your data is, the more efficient your processes are. For years, administrators or other service providers stored data on shared drives, manually pushing data to fund managers. Now, fund managers are rapidly moving to data exchanges, and the ‘data highway’ is constantly evolving and growing. 

The more streamlined and organised your data is, the more efficient your processes are
Daniel Trentacosta, MUFG Investor Services

How can firms differentiate themselves with new technology, and how does this impact organisations and the people in your businesses?

Trentacosta: Firms will always focus on differentiation by delivering value to their investors, which comes in the form of returns. And to the extent that firms can use technology to introduce scale and efficiency, that flows directly to the bottom line.

There is another factor to consider. Daniel McNamara, our chief strategy officer and chief financial officer, recently made this statement at a conference: “Historically, funds are human enterprises that grow organically and often reactively, with most things done in-house.” While it’s clear that innovation and cutting-edge technology are vital for any firm, people are still the greatest asset for asset managers or fund administrators.

What is changing is how they want their colleagues to spend their time. So, they adapt to free up their teams. We help them find that balance. The more we can innovate, the more we can scale, the more we can implement technology and improve communications with their investors, then the more managers can free their teams to take on more value-adding or job-enriching tasks every day. Going forward, that’s how funds will remain competitive.

How is technology impacting the investor landscape? 

Trentacosta: The democratisation of alternatives is underway. There are new investors – a large number from private wealth platforms – entering the market and many people are interested in exploring the asset class, in addition to the traditional institutional investors. These investors are bringing substantial amounts of fresh capital, but are also requiring more transparency and timely reporting, among other things. New technology enables that work and provides the necessary flexibility for conducting business. Investors want it to be as convenient and secure as possible, whether that is online or through an app. We continually work with managers to provide as many tools as possible to improve the investor experience. 

The democratisation of alternatives is underway
Daniel Trentacosta, MUFG Investor Services

How can a full-service fund administrator facilitate the process for fund managers? 

Trentacosta: We always begin by establishing trusted partnerships and by becoming an extension of a fund manager’s organisation. There are several ways of doing that – outsourcing, co-sourcing or a consultative approach where we augment their teams. We spend a lot of time brainstorming with our clients, asking: “How can we help? What is keeping you up at night?” Then, we find a solution together.

Working with trusted partners on technology is a growing trend in the alternatives marketplace. Fund managers with limited resources frequently must consider how, or even if, they want to take on the costly challenge of investing in teams to upgrade their technology in house. What we’re seeing now is they’re bringing in partners that have either already done the work and have the insights for building systems, or have a deeper bench of resources to analyse, develop and implement innovative technology. Frequently, managers find that is a more cost-effective solution, and it allows them to redirect those funds toward driving growth and increasing value. 

How do you help clients manage potential anxieties about introducing new tech?

Trentacosta: We never try to force the issue, and we understand it can be a dramatic shift, especially for teams that have used legacy tech for a long time. Again, it goes back to trust. We always stress this to our clients: “You don’t outsource the responsibility, you outsource the task.” We know they have a responsibility to their investors, and we explain that they are really not giving up control.

Communication is critical. During the planning stages, we will outline how a project will deliver value to the fund manager, their teams and investors. We will explain that large-scale technology implementations will, to some extent, disrupt their daily functions. Then we work with them to ensure it does not distract them from running their funds. While you always consider ROI, sometimes the more important outcomes are those that enhance the client experience for a fund’s investors. There must be a cultural fit as well, with fund managers and their partners each conducting due diligence to ensure they have similar operating goals and objectives. 

How has your approach evolved over the last decade or so? What do you see changing in the future? 

Trentacosta: We have developed a comprehensive suite of services well beyond asset servicing and fund administration, including client banking, fund financing, and FX. We have more than $1trn in assets under administration, work with many of the world’s largest public and private fund managers, and have 17 global offices.

To build on that growth, we must continually diversify and innovate our technology and product offerings. We remain focused on being a trusted partner and extension of our clients’ organisations to help them make the right choices. Our goal is to help them prepare for the new alternatives ecosystem and achieve even greater success in the future.