Anthony Malakian: BST North America: Of Data and People

I’d like to tell you that I missed this year’s Buy-Side Technology North American Summit because I was on an important business trip to Ireland, but in reality I was there officiating a good friend’s wedding. (I did ask him if he’d consider postponing it so I could attend the conference, but his wife—shockingly—would hear nothing of it.)

Fortunately, my colleagues Jake Thomases and Tim Bourgaize Murray did attend the event, and they covered it like a blanket. So now, having digested their exhaustive reporting, I feel like I was sitting in the front row.

Here are the three greatest takeaways from the Summit that will have major implications as we head into 2014.

Data Management: An Ever-Growing Importance/Challenge
Garbage in; garbage out. It’s a saying that gets thrown around a lot in this space, but with the massive quantity of data that is being produced for analysis, bad data has a way of seeping into a firm’s overall data architecture, producing unwanted results.

As one head of technology for a large and successful hedge fund told Tim: “You can build the best piece of hardware in the world, but without the data it’s garbage.”

You need the right people in place for a technology overhaul to succeed, and the business unit managers have to be on board with the process, or else it will fail.

Whether it’s in setting up an effective enterprise data management (EDM) system, investing in new risk models and platforms, or building out an investment book of record (IBOR), the data that underpins that is crucial. And it’s more than just having that data; you have to be able to effectively incorporate and analyze it.

Risk Management and the Buy Side
It’s no secret that data drives risk management. Yury Dubrovsky, the chief risk officer of Lazard Asset Management, said during the event that the buy side is lagging behind the sell side when it comes to risk.

As Jake wrote: “Dubrovsky says he doesn’t believe the sell side’s effective embrace of risk has trickled down to the buy side.” While buy-side firms have invested significantly in risk platforms and models, there is still a lack of human knowledge as to how best to use that information. This came on the back of a previous statement made by TowerGroup analyst Dushyant Shahrawat that portrayed a more optimistic expansion of risk capabilities on the buy side.

And responding to Misys senior risk advisor Bradley Ziff, who called for a “vast increase” in the types of risk analytics that buy-side firms make available to themselves, Dubrovsky stressed that simply having the analytics is not the end game.

“I agree that you need to have the best risk analytics possible, but if you don’t know what to do with it, it doesn’t matter,” he said. “You can pay zero or $5 million—it’s useless. If the culture of the company is not to absorb that information and do something with it, it’s a waste. It requires a cultural shift within the firm.”

Getting Everyone On Board
This is hardly new, but judging by the fact that IT managers keep bringing it up, it must still be a major challenge: You need the right people in place for a technology overhaul to succeed, and the business unit managers have to be on board with the process, or else it will fail. Cultural shifts within a firm are much talked about, but they can turn into messy wars with a loss of time and money.

Hylton Socher, CTO of Fortress Investment Group, said that in order for the firm to complete an overhaul of its EDM system, he had to first get the line-level owners in each business vertical to buy into the project. Mary Kotch, CTO for AIG in the Americas, noted that in order to transform the IT organization the size of AIG, it required her to quickly identify and retain talent.

“You have to understand that the greatest folks on your team—the ones who communicate well, complete programming plans, manage financials—always have other opportunities and offers,” Kotch said. “If you’re not investing in them, retaining them, you won’t be successful. You can’t just rely on your vendors.”