The Future Fund is aspiring to have a “single source of truth” data management process that combines accounting data with business logic, with the aim of enhancing the decision-making process, and balancing the bimodal priorities of investments with operations.
There can be a natural tension in the data management process between the operations view of the world, which wants safety, scalability and reliability, and the investment side of thinking that wants things to be “quick and easily accessed”, according to Campbell McCulloch, head of investment operations at the Future Fund.
Factoring in these two worldviews is particularly pertinent to the Future Fund as it uses a one-portfolio strategy that examines risk and opportunity across all assets classes.
As such, the $118 billion fund has developed a specialist internal information management system, where it can look at the data and solutions required. The system also provides governance over the data and processes.
“We take accounting data and enhance it with business logic where it’s appropriate, to achieve an investment exposure-related view of the portfolio for investment decision making. We realise that data is a strategic asset and requires really strong governance around it,” McCulloch said.
“The data comes directly from our custodian into our data management system. It’s a known starting point and that’s important. It’s the bedrock of one of the data processes of an investment organisation, but it’s an accounting view.”
He added the fund wanted to be able to control its exposures and update exposures according to materiality or risk factors.
“Our aspiration is to establish a single source of portfolio data that feeds into the investment processes and systems. By doing this we look to minimise data duplication which can lead to existence of a many-to-many technology infrastructure. At a minimum, organisations should look to at least minimise further data and application fragmentation.
McCulloch gave the example of the advantages this approach has to private markets, which are typically at the more complex end of investments.
Unlike traditional markets that have a known trade date and settlement date, these investments don’t necessarily have the same protocols.
For example, during the implementation of buying an infrastructure asset there is a point at which an organisation becomes exposed to the riskiness of that asset. This, in effect, becomes the trade date from a “risk on” perspective, perhaps requiring some other risk-related portfolio action.
“We have designed our information management system to be able to manually adjust exposure to reflect these scenarios. They don’t happen often, but can be quite material in size.
“Our investment teams need to be able to look at the investment portfolio and see the risk in the portfolio. These risk measures are often formal and reportable and if we’re are not aware of the impact of these types of transactions the portfolio can be exposed to unintended risk.”