In a recent interview with FundFire, I spoke with author Aziza Kasumov for a piece recently published in FundFire in which I discussed the Discretionary Investment Management Working Group on Data Standards (DIMWG), and the work the group aims to achieve by creating transparent, reliable track record reporting for the discretionary investment management industry.
As the OCIO industry nears $2 trillion dollars in assets under management in the United States, the need for transparency and standards is crucial now more than ever. In FundFire’s article, I had the opportunity to expand on the progress DIMWG has made since its inception in December 2018. With 29 OCIO firms that represent 69% of the worldwide OCIO market along with search consultants and legal experts, the group is well on its way to establishing a reliable set of data standards.
“Ultimately, we wanted to solve this as an industry before the regulators step in, or before the litigators step in,” says Jim Scheinberg, whose search firm, North Pier Search Consulting is leading one of the attempts to create industry standards around a variety of issues. “By creating some standards,… we are at least coalescing around something that’s meaningful.”
As I mentioned in the interview, we applaud the efforts made by the CFA Institute to adapt the prior GIPS standards down to the OCIO application. However, we as an industry working group felt that it was important to build a standard from the ground up from a needs and use basis. Ultimately, any solution that fails to provide a means for true, apples-to-apples comparisons does a disservice to the OCIO industry as a whole. That is the challenge that DIMWG has chosen to take on.
Although it’s stated in the article that, “each effort has several large industry players backing it, but not one has all OCIO powerhouses behind them,” it has always been North Pier’s intention for DIMWG to be a completely all-inclusive and open-source solution. All OCIOs are invited to participate and contribute to the solution. And no standards will be agreed upon without the vast majority of the industry concurring the academic integrity and, most importantly, true value in using the solution. DIMWG is not looking to create a commercial product. Our objective is to provide true, detailed comparisons for the OCIO community.
As with many challenges or opportunities in the industry, it’s important to look at the underlying financial incentives and or institutional inertia associated with any solution. DIMWG does not and will never have a monetary element associated with the standards developed by the group. DIMWG aims to create a clear and fair set of standards that will allow investors to effectively evaluate OCIO providers.
DIMWG’s latest meeting was held virtually in early December. At this meeting, progress was made on reviewing the work done by sub-groups who were tasked with tackling a variety of topics, including segmentation of client types, legacy assets (i.e., deciphering when OCIOs “own” the track record), determining what data OCIOs should be tracking and collecting for future applications, and establishing meaningful ways to measure performance. DIMWG is scheduled to continue its discussions as we enter the new year.
You can learn more about the working group by clicking the link to FundFire’s article below. Or, read more about DIMWG here.
If you are a FundFire subscriber, read the article by clicking here.