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How to Fix the Weak Link in the Mutual Fund Industry’s Data Chain

How to Fix the Weak Link in the Mutual Fund Industry’s Data Chain

Obtaining accurate and reliable corporate actions and dividends data is critical for fund distributors, so they can record mutual fund income to customer accounts on a timely basis. However, the data distributors rely on to process billions of transactions is still delivered in a piecemeal manner. Mutual fund shops and distributors are dependent on four major sets of data: reference, pricing, dividend, and corporate actions. Considering that often firms take in this data from up to four different providers, it’s easy to see how a fragmented data marketplace can affect operational efficiency.

Reference and pricing data pose little challenges across the industry, as it exists as a commodity more or less, of which there are many providers firms can choose. For the purposes of this post, we would like to focus on the two types of data, dividend and corporate actions, that we see presenting the most complex challenges to the industry.

Dividend Data

On the surface, dividend data by itself doesn’t appear to cause too much operational strain, given that the stock issuer’s schedule of dividend announcements a transparent process. However, in the world of mutual funds, where distributing dividends to shareholders out of these pooled investments, it’s easy to imagine how complex a process this becomes as the distributions are tied to maintaining a fund’s tax-free status rather than just paying shareholders excess corporate profits. Receiving reliable data in a timely manner is especially important here, as missing or misappropriating a dividend payment can have unnecessary regulatory consequences.

Corporate Actions

As archaic as it sounds in an increasingly digitized world, corporate actions are still routinely emailed in ‘mutual fund blasts,’ sent individually by fund companies, which forces distributors to rely on manual processing to identify the relevant data and ensure its accuracy. It’s often late, inconsistent or inaccurate, forcing them to rely on labor intensive and error-prone manual processing. It’s an outdated system, where the fragmented approach to data quality and duplication of effort have been a roadblock to automation and improved efficiency within the industry.

Dividends and corporate actions are no doubt the weak links in the mutual fund industry’s data chain, deterring automation and improved efficiency for all the players involved, particularly distributors. What options are available to fix these weak links?

With mutual fund software and automation, email blasts and the manual processing of spreadsheets become a thing of the past. Technology promises to revolutionize corporate actions processing and restore firms’ confidence in their data. Distributors should expect to receive data that’s been vetted by a leading operations team and delivered seamlessly through a cloud-based software package. Accuracy is a critical component, therefore – look for solutions whereby fund companies can enter changes directly into the systems, which are then updated in real time, allowing distributors to always have the appropriate data at their fingertips.

Consider an industry leader

Delta Data is taking a proactive role in making dividend data easier for fund distributors to manage. As the industry’s leading source of declared dividend information, our comprehensive Data as a Service (DaaS) covers over 28,000 open-end ‘40-Act funds within 400 fund families – and is coupled with enterprise-level integration, client configurable data extraction utilities and research tools. In addition, our solution adds missing funds in order to provide our clients with full coverage.

Because DaaS increases transparency and makes it easier to both tailor data to needs and tailor operations to workload ― through real-time updates and project calendars of corporate events ― we think it’s poised to become the industry gold standard for the way firms receive and use this data.

Learn more or contact us today for a demo of our DaaS solution.


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