Financial services organizations have complex and rapidly-evolving data requirements. Whether it’s navigating compliance with ESG standards or diversifying investment products into complex derivatives instruments and alternative investments, the challenges feel never-ending or even flat-out impossible to solve. This begs the question: Are you controlling your data or is your data controlling you?
by John E. Leavy,…
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LISTEN TO THE MUSIC
Have you ever been to JazzFest in New Orleans? If not, I highly recommend it: ten or more stages – zydeco, jazz, blues, rock, country, gospel, African, krewes, big names, local names – all playing at the same time. The problem is: standing in the middle, program in hand, faint music coming from all directions, people celebrating – what’s your choice going to be?
Each listener has a different strategy, but I’ll tell you what absolutely no one does: send out multi-page questionnaires in advance to each and every band asking them about their style, instrumentation, influences, playlist, recording history, etc. Nobody RFP’s JazzFest.
by Mark R. David, CFA…
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Effectively managing market data costs is not always an investment manager’s first priority. Here within we examine the contributing factors, and the opportunities for material cost savings.
by Mick Cartwright, CIPM…
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Spreadsheets are one of the most powerful tools used by companies today, yet one of the most dangerous in common use across organizations. This paper details the risks and ways to mitigate them.
by Mick Cartwright, CIPM, Managing Director…
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If you think the journey to mastering your enterprise data management (EDM) is difficult, consider the teams wrestling with alternatives data management (ADM). Increasing correlation between traditional investments (equities and fixed income) and the pursuit of Alpha has fueled the expansion into alternative investments. Beyond allocations to external managers and hedge fund managers, this segment extends to private equity, private credit, real estate, real assets, infrastructure and more. Each brings its own complexity. When you layer in fund of funds, primary and secondary investments; the customary drill through for traditional investments is just not possible.
Although alternative investment teams use dedicated vendor tools; they still rely in some way on Excel and significant manual effort to wrangle their alternatives data. ADM challenges are not just internal to the team working to meet their own analytic and reporting needs, but external as well. In an analytics-led and data-driven world, firms want to see the whole picture to understand how the full range of investments roll up. CIOs and many others need to examine exposure, risk and performance from a holistic viewpoint, rather than from individual asset class silos. This paper explores the challenges of blending EDM and ADM to drive this complete viewpoint.
by Mick Cartwright, CIPM, Managing Director
and Christine (Tina) M. Madel, CFA, Principal
During an era when critical skills are in short-supply and valuable IT and business personnel spend most of their working hours in meetings, consultants can make the meaningful difference between a project’s success or failure. The right consultant brings diverse skills, broad perspectives and an understanding of both business and technology. In addition, consultants are best positioned to contribute in a way seldom possible by others since they can apply focus and attention to the task at hand – something that is difficult for full time employees to do when they are juggling competing demands and BAU tasks. This article:
• delves into business problems prevalent in many investment management firms, especially in vendor product evaluations and implementations;
• deals with how an outside consultant can play a significant, contributory role; and
• leverages a practical use case to demonstrate key benefits and tangible results delivered by a Meradia consultant who moved an almost failing project to a successful outcome.
by Jose R. Michaelraj, CIPM, Senior Consultant
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Typical vendor selection methodologies include consecutive steps made by the buying firm. Their first step is to consider an ‘anything is possible’ list of vendors before culling it to a short list of qualified vendors, followed by a robust and time-consuming RFP process. A few vendors will make it to the final steps which involve product demonstrations, or ‘demos.’ Even after all this effort and detailed qualitative analysis, a firm may have a difficulty selecting a single vendor and/or feel less-than-confident that their choice is unbiased and free of incorrect assumptions. By including live or remotely conducted targeted demos as the final step, firms are better able to evaluate vendors objectively.
by Christine (Tina) M. Madel, CFA, Principal
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In 1994, Denis S. Karnosky, Ph.D. and Brian D. Singer, CFA published a monograph entitled “Global Asset Management and Performance Attribution” (KS). They presented the idea that – due to the arbitrage known as interest rate parity – some contribution to the total return of a multi-currency portfolio is known, and ‘baked into’ a foreign-currency investment at the time it is made. Because this contribution is knowable and hedge-able, it should accrue to the currency market allocations of the manager – whether or not these are ultimately hedged.
While hugely influential among asset managers globally, these ideas remain largely unexploited in current performance practice. Though KS fully detail an attribution approach based on an expansion of the Brinson-Fachler method, and though this method is implemented in several commercially available performance systems – it is rarely adopted in the field.
We posit this circumstance to have arisen from several causes: misalignments between the paper’s formulation and practical investing reality, as well as inaccurate readings of, and consequently flawed implementations of the attribution method it sets out. We explore these causes in detail, and how they contribute to attribution results that fail to explain portfolio performance, obscuring the otherwise substantial value of KS’ central premise.
Finally, we develop a re-statement of KS that addresses those issues, producing an accurate decomposition of multi-currency effects that precisely explains the portfolio’s performance, while preserving the original paper’s essential insight. We go further to generalize this method and demonstrate its applicability to any investment attribution methodology.
by Mark R. David, CFA, Director of Performance, Risk and Analytics
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The asset management industry comprises a diverse group of firms offering countless products, funds and investment vehicles that are traded in forever-evolving financial markets. There was a time when the trading book and accounting book differed by days or weeks and clients received reports quarterly. This is not acceptable for firms today that are facing the need for complex asset administration and daily reporting cycles. Whether a firm invests in public securities or private assets, each come with their own challenges including underlying exposures, lagged pricing or fair value impacts to elicit and compare to a variety of benchmarks.
Today, managers of all investment strategies are compiling massive amounts of daily data. Fund strategies, client holdings, return results and analytics combine to support actionable information for portfolio managers, investment boards, clients and regulatory bodies. Most asset management organizations that support this daily function call it a middle office, and the platform upon which it relies is best described as a Performance Book of Record (PBOR). This paper outlines why developing a reliable PBOR is essential for next-level growth of your investment management organization – growth driven by data and confidence from knowing your organization is taking advantage of all the informational assets it possesses.
by Richard E. Mailhos, Principal
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Once an organization has decided on a new system, the conversion process follows. Large-scale system conversions are complex, time consuming and expensive; however, they are necessary for investment management companies to tackle sooner or later. Whether the system is a data management tool, portfolio accounting, performance, trading or reporting system, there are key steps an organization should take to ensure both a successful conversion and to avoid risks and pitfalls.
Each implementation is different, and many aspects come into play such as customization, resource availability, volume of data that needs to be converted and hardware requirements. Simply having a plan in place will not ensure success. This paper provides guidance on how to successfully navigate key aspects common to implementation projects.
by John E. Leavy, Principal
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