Raising the bar: Inside AssetQ’s due diligence database
The evidence is there that fund providers and fund selectors want a single platform for fund due diligence information.
All seem to agree the gathering of due diligence information, which is a key aspect of the fund selection and the ongoing investment checking process, is time consuming, inefficient, suffers time delays, incurs data gaps – often falling short of the markets needs and regulatory requirements.
Rather than submitting their own due diligence questionnaires (“DDQs”), some firms rely on the information that the fund manager provides as standard. This makes it almost impossible for these firms to undertake a thorough like-for-like comparison between funds, as the fund manager may be subjective and prone to show its’ funds in the best light.
Fund manager meetings are a key part of fund selection with an emphasis on investment due diligence. Key operational aspects often get overlooked or the fund buyer has insufficient information to guide them with their questioning when meeting the manager.
For those firms submitting their own DDQs, they need to be sure that they have asked the right questions in an unambiguous way and in such a manner that they can get a comparative answer from all fund providers.
There is a growing realisation that there must be a better way to undertake complete and thorough due diligence, partially driven by MIFID and the regulator (reference to TR16/1), but also by internal compliance teams who see data gaps, inconsistent data collection and ambiguous questioning. Reference suspension of the Woodford fund.
Fund selectors may use due diligence questionnaires which have been compiled over time, and which cover some, but not all, the due diligence aspects they should, or rely on fund provider RFP documentation, leaving the fund buyer to pick through and interpret the information provided.
Fund providers say they generally receive a common set of due diligence questions, asking the same questions slightly differently, resulting in duplication of effort and interpretation of questions which are not always asked as concisely as they could be.
The incentive for fund providers to have one platform for due diligence is high. One platform to enter and update data makes complete sense. Providing instant up-to-date information in one location saves delays for clients and ensures there is a consistent level of transparency on opaque products.
The fund buyer wants an information standard, information presented in a consistent, validated format on all funds. Due diligence data without gaps, in sufficient depth – a single platform that enables true comparative analysis between products.
The market is sceptical that such a nirvana can be achieved yet the evidence shows otherwise.
Amery Thomas at AssetQ states “there are a few key building blocks that are needed if a due diligence standard can be established:
- Is the market problem sufficient to drive change and do participants want to do something?
- Will the market provide sufficient input / participation to clearly state what it wants?
- Can all commercial barriers to the adoption of a standard be removed?
- Have any legal / regulatory issues which may affect market uptake been identified and addressed?
Ultimately, does the adoption of the standard deliver value to all the participants, both the fund provider and the fund selector.”
AssetQ certainly fits the bill in meeting the above objectives and has established itself as the largest platform of its type globally.
AssetQ has benefited from the input of hundreds of market participants, from the largest financial institutions, to smallest participant, to create a “golden-source” of due diligence information, presented in a consistent format for all funds, avoiding data gaps (a key compliance requirement), and ensuring that the information is accurate and up to date.
AssetQ’s approach involves dynamic questionnaires that expand relevant areas of scrutiny in response to prior answers. The structured nature of this information, in contrast to custom DDQs, allows for automation of alerting and comparative analysis.
Fund selectors can now go to a single source for all their fund due diligence information, saving time and effort in document management, data collation and analysis.
AssetQ has removed the commercial barriers for fund providers to enter and maintain their information for their clients to access, ensuring fund selectors can access in depth information from any fund provider, from the largest to smallest boutique firms.
AssetQ helps to even the playing field by providing the necessary information to all professional market participants and avoids discrimination based upon firm size or amount invested.
Will the market adopt such a standard? Only if it meets their needs and improves operational and research efficiencies. John Goodall, Head of Private Client Research at W.H Ireland says “Here at WH Ireland, we recognise that technology will play an important role in managing investment suitability. We recently commenced use of AssetQ to do the heavy lifting, as we look to improve efficiencies and have our resources focussed on the areas where they add most value”. The fact that the platform is taking on new clients at an unprecedented rate suggests that the sentiment from WH Ireland and hundreds of other clients is in tune with the broader market
Thomas says “AssetQ operates an industry utility model whereby the market controls what AssetQ does and how it can best deliver a service to meet the needs of its members”. He goes on to say “AssetQ will continue to evolve in-line with the consensus market needs”.
Eric Dickinson, Independent Consultant
AssetQ is the largest repository of fund due diligence information for all domestic and international collectives.
AssetQ provides the leading semi-automated solution for suitability checks on client investments saving significant operational overhead and improving levels of regulatory compliance. AssetQ has the backing of the funds industry and opens up a flow of accurate, critical and key information from the fund provider to the fund buyer. This information is presented in a clear format enabling ease of comparative analysis.
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