How Are Alternative Investors Leveraging Data Warehouses for a Competitive Advantage?

As investment firms continually seek ways to gain or maintain their competitive advantages, one area in which we see notable current activity is in adopting data warehouses. For investment teams, data warehouses act as central repositories that consolidate data from the various sources they need or are interested in learning more from. Essentially, a data warehouse helps to produce consistent, uniform data that is optimized for use in business intelligence, reporting, and data analysis activities. 

Key Benefits of Data Warehouses for Alternative Investments

The data warehousing market size was valued at US $28.73B in 2022, and the total revenue is expected to grow at a CAGR of 10.7% from 2023 to 2029, estimated to reach  US $58.54B within the next six years. Canoe clients from asset servicers like State Street to alternative investors like Blackstone have implemented data warehouses, further exemplifying their usefulness to any investment team looking to scale. 

Manually gathering complex, unstructured data is as operationally challenging as it is time-consuming, error-prone, and difficult to manage at scale. Data warehouses, on the other hand, facilitate efficient processing and analysis of complex data, providing a better environment for understanding investment opportunities and risks. 

By aggregating its data in one place, an investment firm can access and analyze comprehensive datasets effortlessly, powering faster and more efficient decision-making. To this end, data warehouses offer alternative investors three key areas of benefit: 

1. Operational Efficiency: Manual integration of different data sets from various sources is a slow, inefficient process that requires a significant amount of human effort. Leveraging a data warehouse to automate the data integration and management processes can improve data quality and consistency, ultimately helping the team to make more informed decisions in near-real-time. The automation unlocks operational capacity, enabling the investment team to build a more holistic picture for decision-making.
2. Risk Management: Enhancing risk management is a crucial component of protecting investor interests and ensuring long-term success. A central, secure location for managing all data sources allows investors to monitor market conditions, implement risk mitigation strategies, and track portfolio performance more efficiently, further enhancing decision-making capability.
3. Data-Driven Decision-Making: While most investment teams would like to make the most informed data-driven decisions, their ability to take action based on data is often constrained by operational inefficiencies. Using their now warehoused, aggregated historical and real-time data, these teams can perform advanced analytics and refine predictive models to forecast their performance and optimize investment strategies. 

Solving with Snowflake

Snowflake is one company whose data warehouse is popular among alternative investors. A data cloud solution that offers data storage, processing, and analytics solutions, Snowflake first brings together multiple datasets into one central location. Snowflake’s cloud-agnostic system is an attractive option as it is designed to be compatible and work seamlessly across multiple cloud environments, rather than being dependent on a single cloud provider’s technology or services. 

“We use Snowflake to centralize our data and make it readily available for current and future processes, including generative AI, machine learning, and business process improvement. At the end of the day, we want to make the best investment decisions possible and report to our clients in increasingly granular levels of detail,” noted Adam Vogel, Vice President of Business Technology Solutions and Data Governance at Lexington Partners. 

Organizations aggregate their data from different sources and store it in Snowflake. Snowflake users can leverage the data warehouse’s advanced features to run complex business queries, perform calculations, and extract deeper insights from their data. The cloud-based architecture allows users to customize their data storage needs without managing infrastructure and supports integration with analytics tools and programming languages, making it flexible for broader data analysis.

Snowflake in Action

Alternative investment firms are increasingly utilizing Snowflake as a data warehouse to optimize their portfolios, manage risk and compliance, analyze alternate data, and report to their investors. Snowflake data warehousing can be a transformative solution, facilitating some key use cases including:

1. Portfolio Analysis: By integrating data from various sources, Snowflake enables investors to analyze the performance of their alternative investment portfolios and streamline the portfolio rebalancing process. With a greater understanding of their historical and real-time data, these firms can reassess portfolio composition, identify deviations from target allocations, and make more informed decisions on how to adjust their asset allocation. They can perform attribution analysis to identify the drivers of portfolio returns and assess the effectiveness of different investment strategies to optimize portfolio performance and ensure adherence to investment mandates.
2. Risk Management and Compliance: Investment firms can leverage Snowflake’s data warehouse to aggregate and analyze risk-related data from multiple sources, including market data, historical performance data, and data feeds with information about the positions. This data aggregation enables comprehensive risk reporting and monitoring, facilitating risk identification across alternative investment strategies and asset classes of interest. Snowflake’s built-in data governance features and security controls also aid alternative investors in meeting regulatory compliance requirements. These firms can store and manage their data securely within Snowflake, tracking their data lineage and generating detailed audit trails. This ensures the transparency, integrity, and accuracy of their data and supports compliance with regulatory reporting requirements, such as under GDPR, MiFID II, or the SEC.
3. Alternative Data Analysis: Alternative data sources are increasingly important to investment firms considering how to differentiate their investment strategies. Snowflake’s data warehousing capabilities provide a powerful foundation for leveraging alternative and unstructured data. Investors can utilize Snowflake to analyze less traditional data sources, such as social media to gauge public sentiment about specific industries, companies, or events, or satellite data to gain a different perspective on specific sectors, companies, and global economic trends. These unique analyses can provide valuable insights into previously undiscovered investment opportunities or risks. 
4. Investor Reporting and Communication: Effective communication with, and reporting to, investors is crucial for an alternative investment firm’s success. With Snowflake’s data warehouse, investors can streamline their reporting and communication processes. Leveraging Snowflake’s infrastructure and data aggregation capabilities, investors can create interactive dashboards to meet any standardized or bespoke investor request quickly and comprehensively. These dashboards can provide real-time performance updates, portfolio analytics, and personalized insights, enhancing the firm’s level of transparency and engagement with investors. 

How Canoe Clients Leverage Snowflake 

At Canoe, we understand the critical importance of seamless downstream data delivery to our clients. Through our partner program, we have forged strategic alliances with industry-leading platforms that support alternative investors, such as Addepar, Bipsync, and Snowflake. Our existing technical integrations enable investment firms to seamlessly send their data from Canoe downstream, regardless of their preferred tech vendor stack. 

Canoe integrates with Snowflake as a downstream data delivery method to empower alternative investors to unlock the full potential of their alternative investments. Using the Canoe integration, clients can effortlessly collect and consolidate their unstructured financial statement data from various sources before securely and efficiently transferring it into Snowflake’s data warehouse. Snowflake, as a powerful data aggregation platform, can further leverage this data and seamlessly push it downstream to a client’s other systems, enhancing the overall data management process. By combining Snowflake’s robust data warehousing capabilities with Canoe’s streamlined data integration, advanced analytics, and secure data delivery, mutual clients gain a holistic view of their portfolios and investments. 

This seamless, automated data flow delivers data directly into Snowflake, ensuring the mutual client can access timely, accurate information to power the creation of deeper insights, customized reports, and well-informed decisions. Canoe users receive relevant and up-to-date information in their Snowflake instance without delay. Canoe’s optimized data delivery architecture coupled with Snowflake’s scalability as a downstream data delivery solution ensures that the integration remains responsive even as our mutual clients’ data needs change. 

Canoe offers a competitive advantage to mutual clients as our out-of-the-box integration provides simplified onboarding, scalable performance, and quick time-to-value. Some key examples include:

1. Simplified Onboarding: Thanks to the plug-and-play connection available in Snowflake, investment firms can easily access Canoe data directly in their existing Snowflake instance, minimizing implementation time and effort. This seamless integration ensures that clients can quickly leverage the benefits of the mutual solution without downtime or disruption to their workflows.
2. Scalable Performance: Canoe’s solution can handle large volumes of data with speed and efficiency. Coupled with the scalability offered by Snowflake’s cloud-based architecture, the solutions together ensure investment firms can process vast datasets without compromising on performance.
3. Real-Time Data Insights: With the ability to activate Canoe via Snowflake’s Direct Data Sharing, alternative investor clients can gain quick access to increased data processing capabilities and real-time insight. By eliminating the need for data engineering and automating the process of delivering Canoe data into Snowflake, our integration allows users to analyze and act on real-time information, providing them with a distinct competitive edge in a rapidly evolving environment.

Ultimately, the connection between Canoe and Snowflake is critical because it allows clients to allocate more time to analyzing data as they do not have to undertake data engineering. “The integration has taken away a headache because we don’t have to build it. We don’t have to worry about our data being inaccurate or maintaining it. Instead, we can do something else with that time because Canoe has already built this integration,” said Vogel. “We can be that much further ahead than someone who, with the same resources, would have to build the Canoe connection and other elements related to data engineering.”

Next Steps: How Canoe and Snowflake Power Investment Firms for Success

With the financial industry’s ever-increasing amount of data available for analysis, a strong data warehousing solution is essential for investors to navigate the complexities of investing in alternatives. It is evident that data-driven decision-making is pivotal for investment firms seeking to gain a strategic advantage, but also that operationally inefficient processes burden the team and make this less tangible in reality. 

Fortunately, with Snowflake, firms can analyze complex, diverse datasets to perform advanced and sophisticated searches on their data, create data visualizations to communicate with clients, and ultimately leverage those learnings to inform more confident decisions. 

As a downstream delivery method from Canoe, Snowflake’s data storage and analytics help alternative investment firms achieve their goals with a seamless end-to-end solution for their data-driven decision-making needs. 

Existing users of Canoe’s integration with Snowflake are confident that data from Canoe in Snowflake is accurate and ready to use. Canoe automates all the data engineering work that a company would otherwise have to undertake, which ensures that investment firms can efficiently process and analyze data, transforming raw information into valuable insights. Snowflake’s data warehouse guarantees the data is available, governed, and centralized, which further helps investors operate faster and make better decisions. 

By providing investment firms with seamless access to Snowflake data warehousing, Canoe fosters a sense of trust and reliability, making it easier for investment firms to not only perform their work with confidence but also establish a new competitive advantage. Learn more: See Canoe in Action