Blends in Financial Markets: The Key Differentiator
In the financial industry, the construction and management of blended indexes, or “blends,” is a critical service that offers significant advantages over traditional benchmarks. As the industry standard for blend calculation, Rimes Technologies presents this guide to clarify the distinctions between blends and benchmarks, explain their creation and management, and highlight the unique benefits of outsourcing blends data management.
What Are Blends and How Are They Different from Benchmarks?
Blends are custom indexes created by combining multiple data sources and asset classes using various weighting methodologies. Unlike benchmarks, which are standardized and widely recognized indexes used to measure the performance of a particular market or asset class, blends are tailored to meet specific needs and investment strategies. They offer greater flexibility and customization, allowing clients to create benchmarks that align more closely with their unique objectives. Blends are often calculated by data aggregators, focusing on accurate data management and calculations rather than intellectual property.
Why Financial Firms Use Blends
Financial firms often require customized indexes to meet specific investment strategies, risk management needs, and regulatory requirements. Blends provide the flexibility to combine diverse data sources and asset classes, enabling firms to create indexes that reflect their unique investment goals. This customization is essential for businesses that need to:
- Align with Specific Investment Strategies: Tailor indexes to match their unique investment objectives and strategies.
- Manage Risk: Create blends that help assess and manage risk exposure across different asset classes.
- Comply with Regulations: Ensure that their indexes meet regulatory requirements and industry standards.
The Challenges of Managing Blends In-House
Managing blends in-house can be a complex and resource-intensive process. Clients face several challenges, including:
- Data Quality and Integrity: Ensuring the accuracy and reliability of data from multiple sources.
- Compliance and Licensing: Managing regulatory and licensing requirements for diverse data sources.
- Operational Efficiency: Integrating blends into middle and back-office systems while maintaining operational efficiency.
- Cost Management: Balancing the costs of software, hardware, maintenance, and personnel.
- Niche Expertise: The calculation of blends often leads to key personnel risk due to the niche expertise required.
The Benefits of Outsourcing Blends Data Management
Outsourcing blends data management to a specialized provider offers several advantages:
- Expertise and Support: Access to a team of experienced professionals who ensure data quality, compliance, and operational efficiency.
- Cost Savings: Reduced total cost of ownership by leveraging the provider’s infrastructure and expertise.
- Scalability and Flexibility: Adapt to changing business needs and market conditions without the need for significant in-house resources.
- Focus on Core Objectives: Allowing internal teams to focus on their core objectives while the provider manages the complexities of blends data management.
About Rimes
Rimes provides managed data services that specialize in creating and managing blended indexes, or “blends.” We enable clients to create custom indexes using multiple data sources and asset classes with various weighting methodologies, addressing the challenges of data merging, weighting, and rebalancing while maintaining data quality and compliance.
Key Features of Rimes’ Blends Data Management Services
- Flexible Methodologies: Tailor indexes to specific investment strategies.
- Broad Index Coverage: Access to over 4.4 million indexes from 800 providers.
- Customizable Solutions: Options for weighting, rebalancing, and managing data reissues.
- Distribution Options: Data can be distributed via direct feeds, API, and the cloud.
How Rimes Creates Blends
We combine the performance of multiple indices or asset classes using a weighted average approach, such as blending 60% equities and 40% fixed income, ensuring data quality through rigorous validation and compliance checks. Our managed service ensures accurate and reliable data, reducing total cost of ownership and helping clients meet their investment objectives.
Rimes serves over 60 clients including investment firms, asset managers, wealth managers, hedge funds, banks, and insurance companies, providing access to over 10,000 blends, and enhancing clients’ business agility, operational efficiency, and compliance.
