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“Data agnostic,” is a term that you may hear when speaking with vendors that support the separately managed account business, ourselves included. Although it may be widely referenced, its importance may not always be understood, so I thought I would offer a brief description of what it is from both a technical and practical perspective.
First, the technical: In information technology, “agnostic” refers to the ability of one system to work with many systems, rather than being designed for a single system. A system that is “data agnostic” can work with information received from heterogeneous databases, i.e. databases with dissimilar data formats. Where a common protocol is lacking, it is up to the system using data to be able to “interpret” each incoming data format into one it can use.
Now for the practical: Why is this so important for the SMA business? As noted in a FundFire article:
“For years, the traditional SMA business has suffered from a scattered set of practices to communicate transaction data between the money managers that run assets and wealth management sponsors whose advisors oversee the end-client relationships, resulting in a costly patchwork of individual arrangements to handle basic account operations.”
Managers may seek operational efficiency by using a single system for trade order generation and portfolio accounting, as well as a means of consolidating performance measurement for GIPS compliant composites. However, in order to reach more investors, these same managers have accounts at multiple platforms, each with different data standards.
There are instances of industry-wide protocols that help managers efficiently deliver and receive data across platforms, yet even these are not universally accepted — FIX protocol for trade orders is an example. Until the SMA industry universally adopts standards for a common global language, any system supporting SMAs will need to be data agnostic.