One of the key trends now with the global asset management community is the redistribution of products from one region into another – take for example, the popularity of BRIC and emerging markets funds in the US and Europe. Similarly, in Asia you have very high demand for equity funds from the G7 regions, and investment grade bond funds from those countries lucky enough to retain their AAA ratings. Global firms are increasingly co-locating their investment management teams in the regions where the investment is being placed. The middle office support for these teams is also increasingly being co-located with the same teams.
The problems start when the fund is sold in another region, quite often the local sales/distribution team takes the core investment product data from the local team and applies their own slant to the information – this application of regional slants to data coming from the region of investment can lead to very serious consequences, which can often erupt in tribal conflict between the regional division producing the product and the regional division selling the product.
Simple things like re-classifying terms such as ‘Real Estate’ (US lingua) to ‘Property’ (UK lingua) can seem straightforward, but when you have one region that takes a security classified as ‘Asset Backed Security’ and changes this to ‘Cash or Cash Equivalent’, problems can emerge. This is a simple example of course and one that very few firms will make again, but there is unlimited scope for misunderstanding and resulting misclassification of data when you have one team trying to interpret what another team means.
The only way to solve this is for global firms to have global governance and stewardship for their investment product data. The distributed / decentralized model for governance which exists in many global firms today will only lead to continued conflicts between their regional centres, and in turn expose their firm to specific reputational, regulatory and financial risks.
