How to perform better portfolio oversight

Date: May 7, 2013

If you are responsible for portfolio oversight, whether you are an ACD or Board Director, it is absolutely critical to understand how the fund is structured, how the fund is performing, what the fund manager is doing, and to monitor the fund continually. The Board of Directors or the ACD has the regulatory responsibility for the fund. At the end of the day it is about investor protection, so the ACD has to understand, in full, what is going on within the fund.

Oversight is performed in different ways in different parts of the world – be it the UK, USA, Continental Europe, Asia or somewhere else. There have been many failures worldwide due to limited oversight. As new regulations demanding more oversight come into effect, the Board of Directors has a very important oversight role to play.

Previously, oversight was often neglected and as a result investors have paid the price. The Board of Directors of funds which neglected oversight have also paid the price, as they found lawsuits coming their way.

Regardless of the jurisdiction that these funds sit in, and the different structures, ultimately it’s the process of oversight that is most important.

A few years ago the process of portfolio oversight was disorganized and up to every company to perform in a manner they deemed fit. But now the general adoption of exposure criteria such as VAR, along with the adoption of tolerance levels, has slowly made the process of oversight more organized. More and more we are seeing the unification of oversight criteria in relation to fund managers and their boards. Now that we are starting to speak the same language, oversight can exercise its influence.

But do the directors fully understand these risk and performance numbers they are being presented with? Not all boards have investment management expertise. They rely on investment managers to provide this data, to perform segregation duties and to exercise internal controls. So the investment managers not only manage the portfolio but provide the risk figures as well. As more and more responsibility falls back on the board to provide appropriate oversight, they need relevant, timely information on investment risk. Without having the right data and the right tools to analyze that data, they will not be able to perform oversight at the level that the regulators expect them to.

There are many questions regarding the data. Is the data timely? Is it frequent? Is it reliable? Can it be shared easily and securely? These are fundamental questions which impact the quality of any oversight function.

What role can technology solutions play in improving oversight?

Listen to StatPro’s oversight webinar recording to hear the debate and get the answers you need to perform better fund oversight today.

To learn more about 13f-2 watch our webinar replay Part 1: Unpacking the SEC's New Disclosure Rules for Shareholders
Join us for Part 2: Operationalizing the SEC's New Disclosure Rules, for Shareholders on December 12.