Asset management and technology – the intersect
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Adedoyin Florence Adeniran
Niji Oni & Co, Lagos
What is the function of asset management?
Although we understand that an asset owner -- such as a pension plan, insurance company, official institution, bank, foundation, endowment, family office or individual investor -- may choose to manage assets directly, outsource to an asset manager or to use a combination of direct management and outsourcing, all these do not underestimate the importance of asset management.
Different asset owners have different investment focuses, different hindrances and different abilities to withstand risk. For example, pension plans, banks and insurance companies typically aspire to generate sufficient income to meet their set-out liabilities, whereas foundations and endowments often focus on maximising long-term returns and preserve principal.
The projected liabilities of individual pension plans, banks and insurance companies differ markedly, leading to different investment objectives and different asset allocations. Likewise, different official institutions have very different charters and thus bespoke investment portfolios. Furthermore, most institutional clients are subject to regulatory and accounting rules that further dictate their investment portfolios.
Asset management, therefore, helps the asset owners to understand the pros and cons of their industry and how to decipher what to focus on while trying to maximise profit and minimise cost. There are times that the cost of an asset may not be as important as the output that will come from its use.
Effect of technology on asset management in Nigeria
For asset managers to responsibly invest on behalf of their clients, they need robust processes to manage and maintain the tremendous volume of data and information required to have an informed view of the client’s portfolio and risk profile. Historically, asset managers have relied on homegrown technology solutions, often used in conjunction with manually maintained spreadsheets to accomplish this. As the landscape has become more complex, the effort required to load, cleanse and process the information needed to support the investment process has increased significantly.
Recently, certain trends have started to have an impact on asset management procedures in Nigeria. These trends are:
(1) regulatory change;
(2) the digital and data revolution;
(3) more demanding investors with a growing preference for non-traditional assets;
(4) new competitors providing non-traditional assets; and
(5) globalisation.
As Nigeria becomes more informed about these trends and their implications on asset management operating models, the country has realised and deemed it fit to incorporate maximum technology into the sector. This has helped to provide insight into the benefits of technology in optimising outcomes for asset managers and their clients.
The new fast-paced technology helps asset managers while making decisions, especially by organising ultramodern and critical data on portfolios, including the company’s compliance with client-stipulated investment principles, risk exposures and risk analytics. Although technology does not tell investment professionals exactly what to do, it helps investment professionals to measure their risks relative to the risk-and-return objectives specified by clients. It is important to emphasise the new Nigerian Data Protection Regulation (NDPR), which may create more change in the asset management trajectory.
NDPR
The NDPR makes provision for different measures to protect organisational privacy and the general data of people. The NDPR recognises a ‘data subject’ (person) and defines it as ‘the identifiable person who is identified directly or indirectly with reference to an identification number or other factors-specific to his/her physical, physiological, mental, economic, cultural or social identity’.
In simple terms, a data subject can be considered as any person whose personal data is being collected, held or processed. Therefore, the NDPR applies to transactions that involve the processing of the personal data of persons. The activities of asset management involve the use of the bulk of data, both personal and other forms, which has made it imperative for asset management to embrace the provisions of the NDPR.
Conditions for lawful collection and disclosure of data
The NDPR provides situations when personal data can be collected, disclosed and shared: this comes under the general umbrella of ‘processing of data’, which means any action carried out on personal information. A data controller that handles/processes data must do so following the conditions provided by the NDPR. Where the same is not done under the NDP, the processing of such data will be deemed to be illegal and the employer would be subjected to penalties. A person’s data can only be collected and disclosed under any of the following conditions:
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where the data subject has consented to the collection and disclosure;
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where it is done is for the performance of a contract;
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when the processing is required for compliance with a legal obligation;
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when the processing is required for the protection of the vital interest of a data subject or another natural person; or
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if the processing is necessary for the performance of a task carried out in the public interest.
Disclosure of a person’s data with consent
One of the provisions of the NDPR stipulates that a data subject must consent to the collection of their data and the data must be processed in the manner stipulated by the enabling law. Also, organisations may only collect, process and disclose personal data for purposes that are reasonable and necessary to achieve the reason for the collection in the first place.
If an organisation collects personal data for one purpose and then analyses it for an outright different purpose (or makes it available to a third party or parties to use it for a different purpose), the organisation must ensure that the data subject is aware, unless the data is further processed to achieve different purposes in the interest of the public, scientific or historical research or statistical purposes.
Disclosure of the status of data subjects without their consent – public interest
As analysed, the major legal basis for disclosure is consent. Nevertheless, there are other instances when a person’s status can be disclosed without their consent. In this situation, the employers, government agencies or health officials can be in a position to disclose the information based on public interest, but it is pertinent to understand that while disclosing data on this basis, employers should collect only necessary personal data because information about the health status of an individual is classified as ‘sensitive personal data’ that must be managed carefully.
Furthermore, based on public interest, employers and government agencies are permitted to send public health messages to their clients, prospects and the general public because these messages are not intended for marketing purposes. Public bodies may also require additional collection and sharing of personal data to protect against serious threats to public health.
Conclusion
The range of activities attached to asset management has become wide and may no longer be well managed under the traditional system. Nigeria has made the right move by introducing technology to help manage these activities. The issue we only need to look into now is data protection and privacy -- a problem facing almost all industries.
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