Russell Newman, Chief Operating Officer, Rothschild & Co Asset Management.

Back and middle office data concerns

The role of data in the back and middle office operations of fund and asset management companies have changed drastically in the past few years as technology – and client needs – have developed, and this, says Russell Newman, Chief Operating Officer, Rothschild & Co Asset Management, is creating issues.

In a recent Clear Path Analysis report, written in collaboration with Arcesium, several industry leaders in the operations sphere – including representatives from Seiler Asset Management, Northern Trust Asset Management, and Federated Hermes – gave their viewpoints on what the major areas for observation and development in data security were.

"You want to make sure that you pick the solution that is going to give you the most flexibility, but that you still get to control the process, governance, and security around it."

Newman was asked about the role that data aggregation solutions play now and in the future and was keen to emphasise that centralisation and decentralisation of data being a major pain point.

“It is obviously on a firm-by-firm basis, but you want to make sure that you pick the solution that is going to give you the most flexibility, but that you still get to control the process, governance, and security around it,” he said in the report. “The question of how firms are going to deal with saturated vendor environments – with all of this data – is more pressing now than ever.”

Newman speculated about whether there would be situations on this issue, where for instance, there would be multiple vendors that could provide companies with a suite or variety of data that they need at a more commoditised price. “That question still remains,” he said.

“There is so much data out there that could add value to businesses, but because the cost associated with them is so high – and higher if you have multiple offices – the key is how you manage the costs associated with the data to ensure you have what is necessary to run the business,” he said and added that this need will play into the future of businesses and their operating models in a highly significant way.

The high price of data has long been an issue for fund managers, especially when it comes to third-party vendors.

Governance and security

In the report, the contributors were asked about the importance of governance and security measures, which all agreed were of utmost significance to them, and offered their views on the possible solutions that work best and why.

“[My company] take the approach that we want to govern and secure all data, whether there is Personally Identifiable Information (PII) in there or not, and it is general data that every vendor provides.”

“[My company] take the approach that we want to govern and secure all data, whether there is Personally Identifiable Information (PII) in there or not, and it is general data that every vendor provides,” Newman said.

Newman was adamant that PPI and other data security was important and that any breaches to this data – or treatment it is of less than vitally important was a quick way to end up in trouble.

“We want to ensure that the dissemination to applications and systems is done properly, whether it is making sure that we have a Secure File Transfer Protocol (SFTP), that there is encryption or that it is password protected,” he said. “Even with just the traditional emailing of data between stakeholders, we want to make sure that there is Transport Layer Security (TLS) encryption on those emails at least.”

Newman noted that cybersecurity is a hot topic in the industry that receives outsized attention.

"We view ChatGPT-3 as the current leader in a fast-growing market that will see significant investment and development by leading, large technology companies globally.”

A 2023 paper from consultancy Grant Thornton said that cybersecurity was receiving a lot of attention from firms and their clients, partly due to highly publicised technology such as ChatGPT and other automation and artificial intelligence (AI) programs, that have recently been launched.

In a recent blog on the new technology, UBS said, “We view ChatGPT-3 as the current leader in a fast-growing market that will see significant investment and development by leading, large technology companies globally.”

This hype has also, the Grant Thornton paper said, fed into the noise around the possibility of US Securities Exchange Commission (SEC) changing regulation on it.

But Newman noted that this focus could lead to some poor decision-making, especially when trying to do too much to keep up with others in the industry. “It’s not a matter of how but when; you can only do so much,” he said, referring to possible breaches.

“As long as you take the necessary precautions with governance and security around the data, and you are monitoring and testing periodically then you will be doing what you can to ensure that data is correctly housed and managed.”

To see more of this interview, and read the report in full, please click here.

 

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