Buy side firms plan to increase outsourcing of data services

Three quarters of hedge fund and asset managers plan to increase outsourcing of data services between now and 2024, with almost one in five expecting a significant rise, according to a new study by SigTech.

The survey polled 100 systematic hedge funds and quant asset managers across North America, Europe and Asia Pacific with $1.2 trillion in assets under management.

It showed that 73% of managers have already increased their level of outsourcing of data services over the last two years while 70% of respondents invested heavily in their internal capabilities to clean and validate data.

It is well documented how the volumes of data have exploded over the past few years and the growing importance it is has in the decision-making process.

The report found that 77% believe that high quality data and having the technological capabilities to process it efficiently will be key to generating strong investment returns.

However, buy side firms are looking to outsource because of a shortage of qualified in-house subject matter experts and resources.

In addition, nine out of ten fund managers believed that the process to evaluate data, ensuring it meets quality standards, and negotiating with data vendors was challenging.

Fund managers are also turning to third parties because they are focused on improving efficiency and speed when cleaning and onboarding new datasets

In terms of the components of the data life cycle being outsourced, 58% of respondents pointed to vendor negotiations as being the easiest followed by data cleansing (54%)

“It is clear that there is growing momentum among investors to outsource more data services,” said Daniel Leveau, VP Investor Solutions at SigTech.

He added, “The specialist skills needed to manage data and the increasing cost of doing so effectively makes outsourcing an increasingly viable option and allows investors to concentrate on what matters: alpha generation.

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