Latest on data 

The 2023 EU Beneficial Owners’ Roundtable was moderated by Andy Dyson, the Chief Executive of ISLA with EquiLend as the lead sponsor. The roundtable was held in late March with a panel of industry experts discussing topics from the data, ESG, collateral and the change from 2022 to 2023.

A portion of the 2023 EU Beneficial Owners Roundtable is available in the video above. See below for a transcript of the highlights. 

Andy Dyson, Chief Executive Officer, ISLA: We sort of morphed into that world of data. Dimitri is there anything else you would add in terms of how you see the changing role of data in the businesses that these guys run.

Dimitri Arlando, Head of EquiLend Data and Analytics EMEA & APAC, Equilend: There are two key areas to focus on from a performance measurement perspective. Firstly, attribution. Essentially getting a good understanding of why your programme is performing better or worse than previously, and really trying to identify if it’s a specific market or a specific security.

The second aspect is relative performance: how are you doing in comparison to your peers and to the industry? Now, that’s the interesting one. And I think that’s where the evolution is really happening right now, because it was the case and it still is the case for most part, that people look at their performance numbers and they use tools from providers like us that allow them to look at their performance and compare it to a peer group.

It’s really important to make sure that you are truly comparing like-for-like, tools like ours allow you to do just that and compare your performance with portfolios that have the same securities as you, but the problem then becomes when you’re looking at peer groups and you look at sovereign wealth funds, for example, who are very different across the world and have varying levels of appetite for risk, and they have varying investment guidelines as well.

It becomes tricky to benchmark because now you’ve got a whole world of things you can do with that portfolio and a lot of different options. And you don’t necessarily have all the tools to be able to benchmark your performance properly.

A number of beneficial owners are now saying: no, we don’t want to see that, we’re more interested in looking at the same data that trading desks use to do their trades. So they’ve moved away from saying, how’s my performance compared to my peers to now saying, am I getting the best out of my assets?

Cassie Jones, Managing Director, EMEA Head of Financing Solutions Client Management, State Street: I think that granularity and performance is really important because if you can then extrapolate that and understand the drivers of performance moving forward, clients can come back to those opportunistic trades.

Maurice Leo, Client Solutions, Agency Securities Lending, Deutsche Bank: In a way, beneficial owners have been a catalyst for change particularly around data. The whole ISLA securities lending performance measurement group was borne out of, or championed, very heavily by a beneficial owner in particular, who chaired that group. That’s led to guidance notes that I think will accelerate in adoption this year, which will deliver more consistency, understanding around that data. And I think it’ll make it more valuable and as a result.

Dimitri Arlando: I think it is a really important point. So obviously, we’ve done a lot of work on the performance measurement working group to try and drive those standards. However, we still have some way to go.

Andy Dyson: I think also that what SFTR delivered was a clear understanding of what’s a trade and what’s not a trade, and that rigor has fed through into the way people define things like inputs for performance benchmarking, it’s gone into standards around the CDM. So in that sense, SFTR was a great catalyst for the creation of standards and digital standards.

Olivier Zemb, Head of Equity Finance and Collateral Trading, Caceis Bank: You need to have some metrics in place. Data providers have done a great job, but I think more granularity is needed for good benchmarking. For liquid assets such as large/mid cap, benchmarking works well and is very easy. For small caps, corporate bonds, not so much…

Nick Davis, Executive Director, EMEA Head of Relationship Management, J.P. Morgan: I break data down into four points.

Descriptive and Diagnostic - This includes the benchmark providers that the industry utilises, with the addition of your prop overlay (performance of your book vs the industry), backward looking and your current footprint.

Predictive - This is where diagnostics play an important part in conjunction with quantitative research and AI, to establish your value add and how you can achieve out-performance.

Prescriptive – How you achieve the above.