Anthony Malakian: A Data Chief on the Buy Side? Not So Fast

As the need for—and size of—data continues to expand, some financial institutions have decided to create a new role, that of the chief data officer (CDO). This person is charged with overseeing the entirety of the firm’s data, managing it, and deciding on the necessary upgrades to platforms and tools that need to be made.

In January 2012, Bank of America Merrill Lynch named John Bottega to the newly created position of CDO, and in the process gave an upper management voice to a data professional. He reports directly to the enterprise CIO, Marc Gordon.

When the announcement was made, Virginie O’Shea, an analyst at consultancy Aite Group, told Waters’ sibling publication, Inside Reference Data,  that CDOs are “few and far between” at buy-side firms, due to smaller budgets and personnel. Thus, the role of the CDO has remained almost exclusively at the largest investment banks on the sell side. And even there, it’s still a largely nascent position.

In April, Inside Market Data conducted a webinar and posed the question: Who is directly responsible for your firm’s data infrastructure? Only 5 percent of those in attendance said it was a CDO, whereas over 50 percent said it was the CIO or CTO.

Last month at the annual Buy-Side Technology European Summit, Mike Wright, Man Group’s global head of technology scoffed at the idea of a chief data officer. “As CIO, you should be perceived as the chief data officer,” he says. “It’s interesting that some organizations are hiring or forming CDO roles. To me, that’s unfortunate—the CIO should absolutely be the CDO as well. Maintaining and understanding the quality of the data, the ownership of the data, and how it changes and migrates during its lifecycle, is a core part of what our roles should be.”

Echoes
Chris Sims, CTO at Ignis Asset Management, says the role of data management should fall under the remit of the CTO, and that he doesn’t understand “how that function could be done by someone outside of the IT department.”

BlueBay Asset Management CTO Simon Lumsdon says he is concerned that a CDO might undercut the efforts of the CTO. “You really don’t want to worry that they’ll start pulling against you,” Lumsdon says. “You really should have that strategic vision that’s yours to lead.”

Every month in the pages of Waters, we profile a head of technology at a financial firm. Over the past year, we’ve examined technology implementations at Citadel, Cerberus, Blackstone, Pine River, BlueMountain, Lord Abbett and Co. and a number of other large hedge funds. None of them has a CDO, and the individuals we consulted were an integral part of their firms’ data strategies. Consistent with Sims and Wright, others say the idea of ceding that control would be foreign and undesirable. When I spoke to Cerberus CIO Richard Alexander, he was downright giddy about a data warehouse that his team had built.

I understand a bank like BAML, Citi or JPMorgan appointing a CDO, given the sheer quantity and complexity of the data they consume and need to analyze across their retail, mortgage and capital markets businesses. But I don’t see how a specialist CDO would help a hedge fund … and that includes organizations like the Man Group, Citadel and Bridgewater.

CIOs or CTOs worth their salt should be intimately familiar with and intrinsically tied to their firms’ data management practices. Also, when compared to their sell-side counterparts, buy-side technology heads tend to be more connected to the business and not just the technology, and, in many firms, even sit alongside the portfolio managers and traders.

I also have my doubts as to how much sway a CDO really has. Whereas BlueBay’s Lumsdon expressed concern about the CIO–CDO relationship, I just can’t imagine a situation where a head of data will have the same clout as a CIO and CTO. Even BAML’s Bottega reports to the CIO. Chief data officer has a nice ring to it, but it’s not a title I expect to see popping up on LinkedIn at buy-side firms anytime soon.