CIOs live in a world of nonstandard data

The biggest headache many retirement company chief investment officers face is data.  

Several CIOs at the RPA Convergence CIO Roundtable and Think Tank event pointed to nonstandard data from numerous sources as an ongoing difficulty in their profession. 

Investment data services do not always provide information or analyses in the most efficient ways for CIOs to benchmark portfolios or screen investment options, for example, several attendees said. Another big issue is that plan record keepers do not provide participant data in a common format. 

“One of the things we’re trying to do is get all of the electronic feeds from all of our different record keepers sent to [FRA Plan Tools] so they can get them into this tracking software,” said Bob Wagner, CIO at Strategic Retirement Partners. “The thing that is really difficult for us is that everybody has their own way of doing things.” 

Industry groups are working to solve that problem. Earlier this year, the Spark Institute and Defined Contribution Institutional Investment Association launched an initiative for a common file type on which record keepers could agree. That consistency would allow companies to share information about plans and participants easily. 


Another concern is data about the investments themselves. While mutual funds and ETFs represent a big chunk of the assets in 401(k)s, other vehicles, such as collective investment trusts and separately managed accounts, can make it difficult for CIOs to analyze portfolios and screen and track investments. Data providers like Morningstar have abundant CIT information, but investment managers must voluntarily provide data, and it can sometimes be incomplete. 

And while mutual fund firms often replicate mutual fund strategies in CITs, the underlying holdings might not always match completely. That can be a problem if the mutual fund versions of those products are being used for tracking and performance history. 

“Whenever we’re trying to analyze these or run through some kind of a monitoring system, a lot of these investments are very lacking as far as their data goes, so that’s always one of our biggest challenges,” Wagner said. That leads to the question: “What the heck is this that this person has in their portfolio?” 

CIOs also have concerns about whether they are always using the right share class, given the proliferation of different types, he noted. 

“That’s always my big nightmare,” Wagner said. “Did we put the right class share in this account? Are we going to get sued because we were off by 2 basis points?” 


The emergence of environmental, social and governance criteria poses a further challenge, as data and ratings firms evaluate such investments differently, and there does not appear to be any metric for how ESG factors translate to performance, he said. 

Several CIOs cited difficulties making holdings-based analyses of portfolios using Morningstar services. That is in part because monthly CIT data is reported as much as two weeks behind that of mutual funds, meaning that performance data can be a month old by the time it becomes available, one CIO said. 

Another pointed to difficulty comparing factor exposure for different mutual funds. That can be done by building return attribution models, another CIO suggested, though that itself can be challenging, that CIO noted. Recent changes to Morningstar’s services, such as limitations on index data to 10 years when doing return attribution, haven’t helped, several attendees said. 

In the past year, Morningstar has made updates to its Direct and Advisor Workstation services that have made them appear more user-friendly but have come with limitations, according to the CIO. Those changes have reduced the level of information available for geographic exposure for equities and fixed-income security analysis, among other problems they cited. That has resulted in less ability to generate detailed, custom reports. 

Last year, Morningstar replaced the Quicktake feature from its Direct and Advisor Workstation services with the current feature, Morningstar Report, a company spokesperson wrote in response to InvestmentNews

“The new Morningstar report is a presentation of curated information on a single investment that we believe is most important across the individual investor, adviser and institutional segments globally,” the statement read. “It is not intended to be an exhaustive showcase of all our data and analytics. Our other reports, products and tools provide the more specific capabilities and features mentioned by your sources.” 

The company welcomes feedback and “is committed to addressing client concerns and requests regarding missing information, missing features, and relocated information,” the spokesperson wrote. 

Regarding data for non-mutual-fund and ETF products, Morningstar over the past several years has “made significant investments in our data-collection to making data reporting on CITs, Separately Managed Accounts (SMAs) and model portfolios easier and more consistent,” the company stated. “We also broke our CIT, SMA and model portfolios data into three distinct universes in May 2019, meaning our clients can search and compare similar vehicles within each universe.” 


The wild market volatility this year has shown how much damage investors can do to their portfolios by trading at an inopportune time. 

“We’re a huge proponent of the managed account solution,” said Jamie Battmer, CIO at Resources Investment Advisors. “There are a lot of benefits — the empirical data benefits to the end participant — but it almost creates a more opaque structure.” 

And the lack of data investment performance immediately available to plan sponsors and participants can help prevent them from “making the exact wrong decision at the exact wrong time,” he said. 

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