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Asset Servicing | January 15, 2025

Rethinking Data Management in the Nordics

Nordic asset managers looking to optimise their data management are at a pivotal crossroad. For Norway and Sweden in particular, regulatory change, trends in fund consolidation, a continued focus on ESG and the impact of technologies such as artificial intelligence (AI) and cloud applications have driven many firms to rethink their data management processes, focusing on the enhancements needed to enable greater efficiency. Yet many firms lack the building blocks needed for more modernised solutions, hindering their ability to innovate.

Adding to these challenges is a sharp focus on cost control as many firms are under pressure to cut expenses. In a May 2024 survey of global asset managers from Northern Trust, more than 40% of respondents from Norway and Sweden said controlling costs is one of their strategic priorities for the next two years.[1]

As a result, institutions are actively seeking ways to enhance their infrastructure by integrating advanced solutions and new technology into their processes. They face a critical choice: invest heavily in building in-house or outsource to providers offering cutting-edge technology. With the right model, one that leverages both existing systems and outsourced solutions, firms can improve their data management and enable better portfolio construction, investment decision-making, auditing and compliance with ESG mandates.

Focus on Efficiency

Staying Ahead of Regulatory Change

Regulatory change is top of mind for institutional investors. When launching new products, 83% of Northern Trust survey respondents in Norway and 50% in Sweden identified a changing regulatory environment as a top challenge. In Sweden, the government is currently working through a change in the PPM platform ,[2] having established the Swedish Fund Selection Agency, FTN, whose aim is to procure funds of high quality and various risk profiles for the PPM.  

While this change aims to improve fund quality, it has highlighted the importance of being able to document all steps in the portfolio construction process. It also creates challenges for fund managers who must adapt their offerings and reporting to comply, placing a premium on robust data management and transparency.

Fund Consolidation

In Sweden, where the establishment of the FTN has increased the scrutiny and competitiveness of fund offerings, the asset management landscape is undergoing a shift toward consolidation. Asset managers are merging in order to bolster their capabilities and resources to be included for the PPM.

Another trend driving consolidation in Sweden among boutique asset managers is a generation shift among many founding partners. This demographic shift is another complexity to mitigate for a leadership transition while maintaining profitability and market share. To address these challenges, many smaller managers are consolidating to pool resources and strengthen their competitive advantage.

These consolidation trends have impacted the ability of firms to manage their data. Post-merger, the newly established funds often rely on infrastructure and solutions built for smaller firms. This has heightened the need for enhanced solutions that can help streamline decision-making and gain insights that support growth in a rapidly evolving environment.

Meeting ESG Priorities

ESG priorities are central to Nordic investors, driving them to seek investment options that align with environmental and governance standards in particular.[3] However, the increased focus on ESG has exposed system limitations, as effective reporting often requires complex data. In fact, two-thirds of Norwegian and Swedish respondents to the Northern Trust survey identified technology limitations as a challenge in their ability to launch and increase ESG options for their clients. ESG integration requires enhanced transparency, pushing firms to adopt data-driven solutions that can streamline ESG compliance and reporting.

The Impact of New Technology

With Nordic firms often at the forefront of innovation[4], it is fitting that nearly 58% of Norwegian and Swedish respondents to the Northern Trust survey are looking to leverage new technology to achieve their data priorities. AI and other advanced technologies, such as cloud applications, are reshaping investment processes, prompting firms to rethink their traditional approaches to portfolio construction and management. Cloud applications offer enhanced data accuracy and flexibility, allowing firms to access and process data more quickly and efficiently. AI further amplifies these benefits with the potential to provide advanced data analysis capabilities, identify patterns and offer insights that can help institutional investors stay ahead.

As firms look to incorporate more qualitative and quantitative inputs, such as ESG factors and alternative data sources, an advanced data management solution becomes crucial.

Cost Control at the Forefront

Modernising data management capabilities while controlling costs has become the focus for Nordic firms as they weigh their options in pursuit of greater innovation and efficiency. Half of Swedish respondents to the Northern Trust survey cited cost control as a strategic priority in the next two years, with one-third of Norwegian respondents saying the same.

Yet it is often difficult to control costs while undertaking a data management modernisation strategy. Choosing an outsourced solution can provide access to the latest data science technology and expertise without the overhead, offering a more scalable and cost-effective solution for firms looking to optimise their resources. Service providers bring ready-made platforms designed to handle complex, data-driven investment processes so institutional investors can focus on alpha generation and other value-add activities.

A Strategic Path Forward

In today’s fast-moving market, where data-driven strategies are key to maintaining a competitive edge, optimising processes is essential. With the need to consider regulatory change, fund consolidation, ESG reporting and AI and cloud integration, the Nordic region’s receptiveness to new technologies positions it well to consider outsourced solutions as a viable path to improved data management.

 

[1] Driving Growth in Asset Management 2024 | Northern Trust

[2] For Fund Managers | Pensionsmyndigheten

[3] Capital Markets Trends in the Nordics | Broadridge

[4] Innovation in the Nordics 1973-2023 | Nordic Innovation

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