Investor Needs Prompt Buy Side to Rethink Infrastructure

Risk management continues to evolve from what has been a compliance for control function into a more strategic function for portfolio design and capital allocation decisions, Jorge Mina, Head of Analytics at MSCI, has said.

In addition, institutional investors are demanding investing solutions that meet both their specific preferences and financial objective, which requires asset managers to build custom portfolios. 

Mina said that the demands for investors to incorporate their specific preferences, specifically when it comes to things like ESG considerations and climate considerations, have accelerated because of Covid-19.

“What asset managers want to do is be able to offer those portfolios, but without having to incur a huge amount of costs in the manufacturing process. And for that they need to have the right infrastructure,” Mina told Traders Magazine.

“A lot of these solutions have been built in a monolithic way, where in the past you had to get everything from the same source or from the same vendor. Going forward there will be more interoperability of components that you can pick the best pieces that serve the needs of your firm, he said.

Institutional clients need to pull together content, data and models from a number of different sources to have a complete picture, and then make it available to various parts of their firm in the tools that those teams or those functions are using, according to Mina.

“That integration and that simplification of their infrastructure is a massive challenge. This is why we think it’s hugely important to give them flexibility through both an open architecture, and also through integration to third party so that they can pick the pieces that they need based on the infrastructure that they have, and serve the needs of those various teams and organizations without incurring a lot of costs in terms of managing all of that and having a lot of internal resources to sort through it,” he pointed out.

For MSCI, Goldman Sachs is the latest of those collaborations.

On Monday, May 17, Goldman Sachs and MSCI partnered to provide data and analytics across their institutional client platforms, Goldman Sachs Marquee and MSCI RiskManager. Leveraging the combined expertise of both firms in data and risk management, this collaboration aims to deliver higher quality analytics that clients can access in a simplified way.

“Our clients will have access to their implied volatility data on equities, and their clients will have access to our equity factor model data in their platform,” Mina commented.

MSCI works very closely with their clients to understand the problems that need to be solved. 

“We have a big research team that comes up with investment solutions to those problems, but then those solutions need to be delivered through technology, whether it’s through data distribution technologies or through calculation engines,” Mina said.

“We are always looking to collaborate with firms that can help us distribute in areas of our clients where we don’t serve. And also, we’re always looking for partners who can contribute unique intellectual property so that we can launch new products, in some cases jointly. So that’s a big part of our ongoing strategy,” he concluded.