Jul 13, 2022

Managed data service (MDS) providers are supposed to do all the data collection, aggregation, verification, and then deliver good clean data, right? And while that is true, many firms find themselves also verifying the data to ensure that it is clean and fit for purpose. You might be asking … “If I have to check the managed data, what good does it do me to use a managed data service?”

Good question! Let’s look at some ways firms derive value from MDS providers and how they approach validating managed data.

Integration Support

One benefit is that an MDS provider creates, supports, and maintains the data pipelines to the vendors. Depending on the number of data providers, this is no small task, especially considering that MDS providers also ensure that the data files arrive, are complete, and the files are not corrupted. When files arrive late or have issues, the MDS provider will take on the communication with the data provider, freeing the client from having to support that. MDS providers also update the interfaces when the data vendors change them.

Integration support and maintenance is one of the reasons that Cutter Research member firms use MDS providers such as Rimes and FactSet for benchmark data. Of the Cutter Research survey participants that use some sort of MDS, 65% of them employ it for benchmark/index data. MDS providers can quickly add new indices to clients’ data feeds because they often already have the pipelines established to the index providers and only need to update the feed to the client. The client has one feed from the MDS provider to support and one provider to speak to about issues.

The Value-Add of Embedded MDS

When considering MDS providers, remember that many types of providers exist ─ among them, standalone MDS, platforms that provide MDS, and service providers with managed data as part of a larger outsourced offering. While you may not consider BlackRock Aladdin, Bloomberg AIM, or Clearwater as MDS providers, the managed data provided as part of their platforms is a value-add because clients do not need to provide a security master, pricing, or other reference data. And, with the correct vendor licenses in place, clients can use the managed data from these platforms in other applications. In this situation, again, the MDS provider handles any integration issues and updates all interfaces when the data provider changes them.

Members find MDS as part of platforms designed specifically for alternative assets particularly helpful. Unlike data for public assets, data on private assets or alternative instruments is not publicly available, often unstructured, and requires intensive manual intervention and workflows. More recently, some vendors have begun to develop methods to automate the extraction of unstructured data from emails, PDFs and other documents, and websites, while offering services and support staff to manage private asset data on a client’s behalf. BlackRock has developed Private Market Data Exchange, an MDS, that manages and integrates data from eFront Insight into Aladdin. State Street now offers a front-to-back solution for both public and private markets comprising technology and services from State Street, Charles River, and Mercatus, a private asset data and software solution that State Street acquired in 2021. SimCorp offers an Alternative Investment Manager and has partnered with Accelex to help automate alternative investment data extraction and workflows.

Faster to Market

Most asset managers and asset owners will acknowledge that they’re now required to gain knowledge in and onboard new datasets more quickly than in the past. ESG represents one of the biggest data challenges asset managers face as they struggle to understand the offerings, build the integration, and store and integrate the data into internal systems. MDS for ESG data can help firms more quickly acquire the data they need.

Rimes, for example, has integrated with more than 20 ESG data providers and packaged ESG data for specific use cases like SFDR. SimCorp offers an extension of Datacare dedicated to ESG data. The service was originally focused only on SFDR, but the vendor continues to integrate with additional ESG providers and develop other capabilities. BlackRock has formed a number of partnerships around ESG data, including with Rhodium Group for data on the physical impacts of climate change. BlackRock also has taken a minority share in Clarity AI and integrates the firm’s ESG data and analytics covering 30,000 companies in nearly 200 countries into Aladdin. And within eFront Insight, the vendor integrates with ESG risk data on thousands of private companies. Bloomberg MDS also has an ESG offering that manages data pipelines, ingestion, and aggregation of ESG data from several vendors, including MSCI, ISS, and Sustainalytics. BNY Mellon Data and Analytics has an ESG offering that consists of two products ─ a managed service to help clients ingest and normalize ESG data and a business application that clients can use for portfolio construction and analysis. As part of its managed service, BNY Mellon helps clients source and normalize data from different providers, provide a common taxonomy, and resolve the ESG data at the issuer level.

More to Come …

Firms most often cite quality as a driver of any data management initiative and a reason for deciding whether to use or investigate MDS. According to our survey, all member firms using MDS have achieved the benefits they sought for data quality.

As we have often reported in Cutter Research studies, good quality data depends on a multitude of factors ─ from a culture of good data to good governance, architecture, systems, and processes. MDS is a useful tool for improving the efficiency of data management, especially the work of collecting, cleansing, and delivering market data from vendors. MDS should also enable firms to reduce the time spent on repetitive work, freeing up people to focus on higher-value tasks for delivering good quality data to the business.

For more information, see our Managed Data Services research report, where we explore other drivers for using MDS, share insights from our Cutter member consortium, and provide information on MDS providers.