Northern Trust Hedge Fund Services is calling on the hedge fund industry to leverage technology and adopt clearer industry standards in data management to help close a gap in transparency expectations between fund managers and investors.
In Overcoming the Challenge of Transparency, Northern Trust Hedge Fund Services suggests that better transparency capabilities can be achieved through adopting clearer industry standards for data communications that pertain to four areas:
Aggregation: Capturing data from multiple sources, centralising it and providing a presentation and data-delivery element.
Normalisation: Translating and formatting the data from each source consistently and enriching it by sourcing missing values.
Verification: Validating the accuracy of received data through reconciliations, overriding valuations where needed, running data quality checks and resolving issues or discrepancies.
Integration: Assimilating systems, business processes and data-delivery formats to ensure easy delivery of aggregated data to external systems and counterparties.
“The forces driving the industry today – investor needs, an increasingly competitive marketplace, more complex financial markets and regulatory scrutiny – are creating real needs for integrated data solutions,” said Peter Sanchez, head of Northern Trust Hedge Fund Services.
“The technology exists today to allow investors to receive more transparency while managers protect their intellectual property, but a lack of market consistency around data makes those solutions quite expensive. We believe that better data standards, established through collaboration by industry leaders, can help more firms adopt these practices, which in turn can bring costs down and make these types of solutions accessible to the entire industry.”
