How technology solutions can help asset managers with regulation and compliance issues
by Peter Raffelsberger, IT Architect, Pioneer Investments Austria
Fast growing demand for detailed portfolio data in high quality
The demand for very detailed portfolio data in high quality is continuously growing mostly due to new regulatory reporting requirements for both asset managers and their clients. Typically, the consolidation of data from various sources is required as well.
Consequently, the existing dozens or even hundreds of different interfaces constitute a horrible situation for any IT system or process. When using CSV interfaces, taking care of the different date/number and line formats is crucial. Maintenance and time consuming data quality processes are constantly lowering revenues.
The Alternative: FundsXML
An alternative to the increasing numbers of interfaces is the usage of an open xml format like FundsXML. Asset management companies from several European countries have developed this xml format during the last decade. It offers a wide range of data fields in a very flexible way for different purposes:
- static fund data (name and identifiers of fund, management company, strategy, …)
- NAV data (NAV per share, NAV total, units outstanding, …)
- price and dividend data (for performance calculation)
- asset allocation data
- FPP data, recommended by the European Fund and Asset Management Association (EFAMA)
- KIID data
- holdings with optional security and OTC master data
(including exposure and underlying information)
- transactions and corporate actions
- earnings data
- fees data
- country-specific data
Depending on the respective demands one, some or all parts of the format can be used. Furthermore, adding new sections at a later stage does not require adaptions of existing solutions.
Single XML format with built-in format checking
The usage of an xml schema has many advantages in comparison to a regular CSV format:
- native support for optional fields/sections, tree structures and built-in loops
- unified field format description
- automatic format checking
- built-in multilingual documentation
- clear meaning of each data field
- thousands of tools available
Reduction of costs for development and maintenance
A single format interface is much easier to develop, to test and to maintain. All data feeds benefit from enhancements of the interface. The implementation of new feeds is primarily a matter of configuration and requires a couple of hours instead of weeks of man-power.
Easy cross-system, cross-company and cross-border communication
Using a standard format makes it much easier to replace or upgrade IT systems and to exchange data with other companies in the respective country or abroad. One obvious benefit from the design work already done during the development of the FundsXML format, especially when data is exchanged between different countries.
Simple data quality process
A single data format enables a single set of quality checks. The name of the data fields do not differ from one interface to the other, which makes daily life much easier and documentation shorter. One set of quality checks supports a simple data quality process. Using the FundsXML format ensures a minimum level of data quality. Even the quality checks themselves can be shared within the community as long as they are based on original FundsXML fields.
No more discussions about the definition of specific data fields
Sometimes it is hard to get the exact definition of a field. E.g. what is meant by “NAV”? Is it the NAV per share or the total NAV? Is it the total NAV of the fund or the share class? What is meant by “Market Value”? Does it include interests or not? Is it meant in fund currency or in local asset currency? By using FundsXML, the definition of the respective field in the schema avoids unnecessary confusion and makes the practical handling easier.
Vendor independent organization
The FundsXML Standards Committee (FSC) consists of representatives from investment companies and national fund associations from Austria, Denmark, France, Germany, Luxembourg and The Netherlands. This ensures a broad representation of the industry as well as a complete independence from commercially driven vendors.
Already used for regulatory reporting in Austria and Germany
The FundsXML format is already used for the “Bundesbank-Meldung” in Germany and the “OeNB-Investmentfonds-Statistik” in Austria. In addition to that the Austrian Control Bank (OeKB) is running a web-based data hub, on which FundsXML documents can be uploaded and downloaded in a fully automated way including a detailed authorization system.
We are facing more and more regulatory requirements in the investment fund industry. The use of FundsXML can help to improve efficiency and flexibility of collecting and distributing fund data needed.