Although many financial firms are still facing budgetary constraints, there appears to be at least one area in which spending could grow: buying the necessary data to value the securities institutions trade and hold.
A study just released by consultancy A-TeamGroup shows that about 61%s of 50 North American asset managers and securities services providers expect their budgets to buy data will grow over the next two to three years. About 41% of the respondents expect an increase of about 25%. The study, commissioned by data providers Standard & Poor’s and SIX Telekurs, was entitled “2011 Performance Benchmarking: Valuations in North American Buy Side Institutions.”
The current budget: over one quarter of the respondents said they had budgets of over $1 million a year. About 22 percent had annual budgets of between $250,000 and $500,000 while almost 17% had annual budgets of between $500,000 and $1 million.
The increase in spending on data to price assets appears to fit in nicely with the top goals of fund managers and securities services firms over the next year. Twenty two percent of respondents wanted to increase the types of asset classes valued to include private placements, alternative investments, emerging markets and thinly traded swap contracts. About 12% said they wanted to expand the number of independent data sources they use so they can reduce their reliance on price quotes from brokers.
Fund managers and their service providers – custodian banks and prime brokers – need market data and other information such as curves to price the securities they hold and trade so they can ultimately value their portfolios and measure their performance. However, 27% of the respondents said that they face challenges in finding data or the right models for valuing a security.
