Impact of High-Quality Market Data
on Modern Investment Strategy – Part 2

Author:

Grace Osemerin
MD Valuations Senior Pricing Representative

In Part 1, we explored how poor data quality can lead to costly investment mistakes, the increasing role of market data in investment policy and how quality data transforms investment decision-making.

Here in Part 2, the focus shifts from the “Why” to the “How”. We explore risk management and compliance optimization, challenges and opportunities of high-quality data and how better data leads to higher returns.

Risk Management and Compliance Optimization

Regulatory requirements are getting tighter and more complicated (e.g., SFDR, MiFID II, SEC reporting obligations) making high-quality data pivotal to compliance.

Quality data ensures:

• Accurate calculation of key fundamental risk measures such as VaR (Value at Risk) and liquidity profiles.
• Optimized stress testing and scenario analysis.
• Timely regulatory reporting and disclosures and reduced legal and reputational risk.

With complete and consistent data, risk teams can more precisely measure exposures and spot emerging threats. Portfolios behave as expected because the inputs (market data, position data, etc.) reflect reality. Risk is easier to manage, providing insight into volatility and potential losses so that portfolios can be adjusted proactively. Clients, regulators, and internal stakeholders have greater confidence in reports and models when they know the data is solid. Conversely, few things undermine trust more quickly than reporting errors or restating values due to a data glitch. Investors and regulators demand accountability; data integrity is foundational to reputation.

Challenges and Opportunities

Recognizing the importance of quality data is one thing—achieving it is another. While the benefits are apparent, firms must navigate obstacles such as information overload, cost of integration, data governance and legacy systems.

Many firms are taking concrete steps to overcome these obstacles to ensure data excellence such as:

• Implementing robust data governance programs (defining standards for accuracy, completeness, timeliness, etc.)
• Investing in modern data architectures (such as centralized data lakes and real-time data feeds) and instilling a culture of data quality across teams.
• Appointing chief data officers and dedicated data stewardship teams to monitor and continuously improve data integrity.

Outsourcing data management and cleansing allows investment teams to focus on analysis rather than routine data maintenance. Having the right data partner can be invaluable in handling the scale and complexity of today’s information.

Better Data, Higher Returns

Numerous studies indicate that data-driven firms substantially outperform their peers. According to a McKinsey Global Institute study, data-driven organizations are significantly more likely to acquire customers and achieve profitability than those that lag in leveraging quality data and analytics.

Firms that invest in data quality infrastructure today are positioning themselves for returns later, including:

• Tailored investment products made available through demographic and behavioral data.
• Real-time portfolio diagnostics that react instantaneously to market changes.
• Generative AI- and predictive analytics-powered next-generation decision support systems.

High-quality market data is essential. It is relevant for performance. Poor data leads to bad decisions, compliance problems, and lost profits, while good data inspires better insights, faster execution, and improved returns. It is the foundation of intelligent AI and visionary strategies: poor-quality inputs inevitably lead to poor-quality outputs. Fund managers and administrators must prioritize putting data excellence first. Build a culture of accuracy, invest in clean, timely data, and continuously improve data quality. The ones that do will win. They will be able to innovate, react quickly, and make decisions with confidence in uncertain markets.

The bottom line: good data equals good decisions and good outcomes. In an industry built on information, those who treat their data with the care and importance it deserves will inevitably lead the pack.

Confluence Technologies, Inc. is a trusted source for clean, high-quality data

Confluence is a global leader in data technology and services, offering quality aggregated data and sophisticated pricing solutions for a range of assets, including those that are complex or less liquid. Our extensive suite of solutions is designed to assist asset managers, asset owners, and investment service providers worldwide in making more informed decisions, helping manage risk, and more easily satisfying regulatory requirements.

We transform data challenges into actionable insights.

Disclaimer

The content provided by Confluence Technologies, Inc. is for general informational purposes only and does not constitute legal, regulatory, financial, investment, or other professional advice. It should not be relied upon as a substitute for specific advice tailored to particular circumstances. Recipients should seek guidance from appropriately qualified professionals before making any decisions based on this content.  

Unless otherwise stated, Confluence Technologies, Inc. (or the relevant group entity) owns the copyright and all related intellectual property rights in this material, including but not limited to database rights, trademarks, registered trademarks, service marks, and logos.  

No part of this content may be adapted, modified, reproduced, republished, uploaded, posted, broadcast, or transmitted to third parties for commercial purposes without prior written consent.

About Confluence

Confluence is a global leader in enterprise data and software solutions for regulatory, analytics, and investor communications. Our best-of-breed solutions make it easy and fast to create, share, and operationalize mission-critical reporting and actionable insights essential to the investment management industry. Trusted for over 30 years by the largest asset service providers, asset managers, asset owners, and investment consultants worldwide, our global team of regulatory and analytics experts delivers forward-looking innovations and market-leading solutions, adding efficiency, speed, and accuracy to everything we do. Headquartered in Pittsburgh, PA, with 700+ employees across North America, the United Kingdom, Europe, South Africa, and Australia, Confluence services over 1,000 clients in more than 40 countries.

For more information, visit confluence.com