DATA & ANALYTICS

Data Leaders vs. Data Laggards

How the investment industry is — and isn’t — harnessing the power of data and analytics.

Featuring highlights of the State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit

DATA & ANALYTICS

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How Big is “Big Data”

• 2.5 quintillion bytes of data are created every day.1

• Global IP traffic is projected to reach 554 billion gigabytes per month by the end of 2016. 2

That’s more than 110 times all of the information

estimated to have been created — ever — until 2003.

1”Customer Analytics Pay Off,” IBM, January 2012.2Global Cloud Index; cited in Transforming Experiences, from Devices to Datacenters, Intel, April 10, 2013.

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34%

33%

33%

North America Europe

Asia Pacific

About the Research

A global survey of more than 400 asset managers and institutional asset owners on investment data and analytics, conducted by the Economist Intelligence Unit on behalf of State Street (August and September 2013).

11%

18%

20%

8%8%

17%

19%

Respondents by Region Respondents by Type

Banks

Insurers

Pension Funds

Other

Diversified Asset Managers

Traditional Asset Managers

Alternative Asset Managers

Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit

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Disruptive Industry Trends Require a Rethink of Data Strategies

Issues Most Likely to Drive Change in Data Strategy Over Next Three Years

Expansion into new regions

Growing volume of trading data

More stringent risk management standards

33%

34%

38%

Asset Managers

(Top three issues cited)

Asset Owners

(Top three issues cited)

Expansion into new asset classes

Competitive pressure

Increased demands from regulators

33%

35%

37%

Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit

More stringent risk management standards

Growing volume of trading data

Expansion into new regions

Increased demands from regulators

Competitive pressure

Expansion into new asset classes

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The Industry is Investing Heavily to Keep Pace

11%

75%

11%

2% 1%

Significantly increased investment (>20%)

Slightly increased investment (1-20%)

Made no change

Slightly decreased investment (1-20%)

Significantly decreased investment (>20%)

Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit

% Change In Investment into Data and Analytics Over Past Three Years

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Data and Analytics Capabilities are a Priority for Institutional Investors

37%

54%

8%

1%

Most important strategic priorityHigh strategic priorityMid-level strategic priorityNot a strategic priority

Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit

Data is the Key to Addressing a Wide Range of Strategic Concerns

• Nine out of 10 institutional investors view data and analytics as a high strategic priority

• For 37 percent, data and analytics as the most important strategic priority

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Transforming Volume into Value

Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit

Top Challenges Related to Investment Data and Analytics

Accuracy of data

Lack of integration between different data sources and types

Timeliness of data

Ability to customize data to suit different end user needs

Ability to extract broader themes and forward-looking insights from data

Increased volume of data

37 %

34 %

34 %

31 %

29 %

29 %

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An Industry Divided by Data

1. “Data Leaders” – Companies in the survey whose data and analytics are already a source of competitive advantage

2. “Data Laggards” – Have yet to gain full benefit from their data

Data is a competitive asset … But few know how to use it

• 66 percent believe data will be a key source of competitive advantage in the future

• 86 percent increased investment in data infrastructure in the past three years

• Only 29 percent of firms are reaping the full benefits from their data and analytics capabilities today

• Our research reveals that a capability gap is opening up between data leaders and data laggards

Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit

The Industry is Polarized by its Approach

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X

• More likely to get distracted by the

complexity of data management

• Less likely to feel their data capabilities are keeping pace with the growth of their business

• Generating forward-looking insights from data

• Integrating risk and performance analytics

• Optimizing their electronic trading strategies

50%

30%

92%

7%

Data Leaders are Better Prepared for the Challenges Ahead

53%

50%

42%

64%

72%

70%

Leaders Laggards

% confident in capabilityData leaders are more confident in ...

% agree with statementBy contrast, data laggards are …

Source: State Street 2013 Data and Analytics Survey conducted by the Economist Intelligence Unit

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Five Steps to Go From Laggard to Leader

1. Improve risk tools with multi-asset class capabilities.

• Integrated risk and performance analytics

• Risk and analytics tools that have multi-asset class capabilities

• More holistic, flexible and actionable risk tools

• Factor-based risk systems

Risk analytics is an area where fewer institutional investors express confidence in their capabilities, as portfolios grow more complex and diversified.

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Five Steps to Go From Laggard to Leader

2. Develop better tools to manage regulation in multiple jurisdictions.

• Systems that are supported by up-to-date regulatory expertise

• Systems that include rule-sets to help manage compliance requirements

• Customizable reporting tools integrated with the necessary databases

Approximately one-third of respondents emphasize the importance of being able to extract insights from multiple data sources and the need for flexible, modular systems that will grow with the business.

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Five Steps to Go From Laggard to Leader

3. Improve the ability to manage and extract insight from multiple data sources.

• Create data warehouses to integrate multiple databases and sources into a “single version of the truth”

• Use advanced analytics to find new ways to extract insight from overwhelming amounts of data

• Developing efficient processes to capture, clean and transform data, together with the right governance to assure data integrity

Integration issues are often the key barrier to preventing investment firms from achieving their goals with data. They are also one of the biggest frustrations with traditional vendor solutions.

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Five Steps to Go From Laggard to Leader

4. Optimize electronic trading platforms.

• Better integrated electronic trading platforms.

• Need for integrated OMS/EMS and multi-asset class trading platforms.

• Need for products/services that can support trading and clearing needs with regulatory changes.

When asked where they will spend more money, respondents highlighted order management and execution management systems (cited by 86 percent of respondents) and portfolio optimization tools (76 percent of respondents).

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Five Steps to Go From Laggard to Leader

5. Develop a scalable data architecture that will grow with your business.

• Technology with scalability to handle growth and diversification

• Systems that support global reporting

• Support for rapid product innovation

Institutional investors need a flexible data infrastructure that can keep pace with evolving client needs and regulations — as well as flexibility to manage new asset classes, complex mandates and offshore assets.

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The Bottom Line

• Firms that develop the right data tools and strategies will be rewarded with better insights, improved performance measurement and a deeper capacity to understand risk across their global activities

• These advantages will be the edge that defines our future industry leaders

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This document is for marketing and/or informational purposes only, it does not take into account any investor's particular investment objectives, strategies or tax and legal status, nor does it purport to be comprehensive or intended to replace the exercise of a clients own careful independent review regarding any corresponding investment decision or review of our products and services prior to making any decision regarding their utilization. This does not constitute investment, legal, or tax advice and is not a solicitation to for products or services or intended to constitute any binding contractual arrangement or commitment by State Street and/or any subsidiary referenced herein to provide securities services. State Street hereby disclaims all liability, whether arising in contract, tort or otherwise, for any losses, liabilities, damages, expenses or costs arising, either direct or consequential, from or in connection with the use of this document and/or the information herein.

This document contains certain statements that may be deemed forward-looking statements, which are based on certain assumptions and analyses made in light of experience and perception of historical trends, current conditions, expected future developments and other factors believed appropriate in the circumstances.

© 2013 State Street Corporation