Removing barriers to data, optimising insights and analytics and encouraging firm-wide data and technology cooperation are key to improving investment returns, the 8th Fund Summit has heard.
Speaking at the Summit, Daniel Gourvitch, Managing Director and Head of Aladdin Platform at BlackRock recognised the substantial challenges that investment firms face when it comes to data management. However, he said that there are also significant opportunities for those firms that manage investment data in a seamless manner.
“Client expectations are shifting and fund managers are being asked to do more at a faster pace – from adding asset class coverage, to incorporating data into the investment process, to reducing costs in an increasingly regulated construct.”
Managing these demands while simultaneously being able to scale, adapt and respond with agility to changing market situations requires an enterprise-wide approach to data, analytics and technology, Gourvitch said.
As a platform, Aladdin was built on this premise and it’s served the firm well. “From the very start, we’ve had this dynamic of building Aladdin for BlackRock and using it to bring our people together, our processes together to make better decisions on behalf of our clients. [Having] all people in our firm work across the same system and data platform across the investing lifecycle, across geographies and across asset classes [has] created an amazing amount of ability to scale and adapt and be agile as an institution,” Gourvitch said.
A second prerequisite is having a clear understanding of where people can add most value and where technology, data and analytics can add differentiated value in the investment process.
“The question we ask ourselves is how do you spend your most precious resource – which is the time of your people – in a way that best reflects what you are uniquely great at, and delivers the most value for your end stakeholders,” Gourvitch said.
These considerations are leading clients to partner more deeply with Aladdin and have led the firm to strike deep partnerships with Microsoft Azure and Snowflake and embed those capabilities in Aladdin. Importantly – it’s also driving a revolution in the way that the firm’s own internal employees interact with technology.
“Today, most of the people joining our firm know how to code in at least one language and we are not talking about engineering roles. These are traders, portfolio managers, operations specialists and compliance specialists. These people are starting to interact with data and technology, not just as users of technology, but as individuals writing code to do their jobs better and more efficiently,” Gourvitch said.
While not every user is that technologically savvy, it means the platform can now cater to a great variety of different user profiles, ranging from professional engineers through to those starting off with simple data visualisations, albeit with a potentially hefty dose of oversight and constraints. “Understanding who is doing what for what purpose is very important. Thinking about oversight as a matter of balancing creativity and control is important,” Gourvitch said.
Making the most of employee skills also means facilitating cooperation and – critically – avoiding a situation where a solution becomes either overly user-led, or conversely IT-led.
“The real magic happens when you have a combination of data and technology teams that are able to elevate conversations, while being driven by the front-office users in those core areas that are serving them. It is less about who is leading the process and it is more about ‘how do we find the collaboration model that brings together the horizontal connectivity across the firm.’ That is how we build technology for different constituencies within our respective teams at BlackRock,” Gourvitch said.
Revolutionising the way in which users interact with data and integrate it into investment decision-making is essential to keep up with the exponential growth in data, but it’s arguably even more critical in the ESG landscape, where the data challenge is particularly pronounced.
“We think about ESG data as part and parcel to the investment process. Understanding and being transparent about the provenance of data, how it is being used and how the math works is critical. We are at a stage of maturity where we are quickly moving from ‘I need an ESG score’’ to asking ‘what does this ESG score consist of and how was it calculated?’ Making sure that there is a deep understanding of data sources is very important.”
Similarly, on the unlisted asset front – another key area of growth for Australian investment managers – Aladdin is investing heavily to ensure its users have a full understanding of underlying exposures and can assess these as a whole portfolio.
“The whole portfolio view is very much how we run our business at BlackRock and having a single integrated view is critical to understanding the risks in a portfolio. However, the unlisted space has specific needs across the investment process, by virtue of the assets being unlisted, so simply showing data side-by-side is not as helpful. It’s about creating a risk factor model so that if you are looking at sector exposures, you can see the sector exposure at the individual holding level, with private and public assets together sharing an underlying common methodology. It’s a synthesis, rather than a summary,” Gourvitch said.
Providing improved and integrated analytics among users is one priority but perhaps the greatest trend that Aladdin is contributing to is in the growing convergence of wealth and asset management and the role that service providers can play in the democratisation of data. That has paved the way for the launch of Aladdin Wealth, which aims to transform how advisors engage with individual businesses.
“While individual and institutional investors continue to have very different needs, the core idea of bringing the same types of sophistication into the investing process for the benefit of individual portfolios is something that we are seeing happen in different ways and shapes in markets around the world. With Aladdin Wealth, we’re looking to provide those services that we are using at the core of Aladdin at scale in a way that reflects the needs of an individual portfolio or a personalised portfolio, without sacrificing or trading off the rigour that lies in the core of Aladdin,” Gourvitch said.
“It’s about the taking the best data, analytics, intelligence and technology that was previously only available to banks and institutional managers and bringing it into portfolios to help investors and individuals and families achieve their objectives and financial outcomes,” Gourvitch said.