Resources

Leveraging technology for performance management

Date: November 11, 2014

Dr Ian Thompson, a recognized subject matter expert in investment performance analysis recently joined StatPro as Client Integration Director. We asked Ian to share his insights into the future of performance measurement.

Q: What does the industry need in the next generation of performance systems?

Ian: For a number of years we’ve seen a distinct separation of products in the performance system vendor market into two distinct approaches, one focused on automating performance processes in the middle-office and the other focused on providing more interactive analytical tools for the front-office. In my view the key challenge for performance vendors over the next few years is to be able to adequately service the demands of both.

How do you ensure accuracy, consistency and independent scrutiny of performance across large numbers of portfolios in a cost-effective and scalable fashion, whilst at the same time providing the responsiveness and flexibility for relevant and effective analytics demanded by investment teams and executive management? For many years this simply hasn’t been possible with the available technologies in a single product and the resulting data management overhead and divergent results from different platforms has continued to cause headaches for both performance and investment teams globally.

Cloud-based technologies have opened up a new opportunity to fundamentally change the performance vendor landscape. The deployment of a single software version across all clients enables all these clients to benefit from new functionality on a much more frequent basis without the need for lengthy testing and multiple system environments.  In StatPro’s case this has allowed us to rapidly roll-out new features across a common platform benefiting both performance and investment teams in response to fast-changing requirements. Index, instrument and risk analytics are also provided as part of this platform, making it much more efficient to both implement and use.

Q: How can the industry manage an ever increasing amount of data in a more effective way?

Ian: The demand to manage increasing volumes of data constantly seems to outpace the ability of system providers’ technology to respond. Historically this has been caused by a number of factors, including the requirement for shorter measurement horizons, expansion of the universe of portfolios to be analyzed, more granular analysis across all instrument types (particularly fixed income attribution), as well as increases in the size of firms themselves through consolidation and growth.

New technology also provides the means for a truly scalable approach to address ever-increasing requirements both in terms of data and processing growth. Additional space and server capabilities can be automatically increased on demand, whilst maintaining or even improving service levels. This can be entirely managed by the vendor together with the hosting platform provider, without the involvement of the investment firm’s IT resources. Indeed this is one of the principal benefits of a true cloud-based approach (in contrast to an installed or even hosted model).

Another important way that a good performance vendor solution can help is by providing workflow and automation, including the provision of extensive exception-based checks and controls to ensure high data quality. It is a truism that performance measurement and analysis is about data, data, data and it is certainly the case that performance and middle-office teams will not be able to cope with increasing amounts of data whilst maintaining high quality analysis unless very good tools in this area are available.

Q: What areas of the performance measurement process can technology most enhance?

Ian: Performance teams have long been adept in use of spreadsheets to perform complex and flexible analysis arising from new challenges such as fixed income attribution, multi-asset class analysis, complex reporting requirements and so forth. But it is in providing scalable and robust analysis in such areas, with high volumes of data, where technology can make an enormous contribution.

Taking fixed income attribution as one example – here we face a challenge of both volume and complexity:  investment processes which are often complex, involving multiple concurrent decisions on yield curve shifts and reshape, spread changes, currency bets operating on portfolios including diverse and sometimes illiquid instruments with benchmarks comprising assets up to the tens of thousands – all calculated on a daily basis: technology is indeed really needed here!

Ultimately technology can help the performance analyst by both enabling him/her to have more time to devote to evaluation and added-value analysis and by providing effective tools to perform and communicate this analysis. The former can be provided by the automation, workflow and control functions offered by a truly scalable performance platform, whilst advanced functionality and presentation features will help to satisfy the latter requirement.

Q: What, for you, sets StatPro’s strategy apart in the vendor landscape?

Ian: As I see it, StatPro has a unique proposition for the performance analytics vendor market for a number of reasons.

Firstly in having built a new scalable platform utilizing true cloud-based technology,   in including index, instrument and analytics data and in providing risk analysis from the same platform as performance analysis (including fixed income attribution using the same risk numbers).  The benefit of this is that an organization can have StatPro’s extensive performance and risk capabilities up and running much more quickly and be confident that the platform is being frequently enhanced with great new features (every two months) without the need to upgrade.

Secondly, StatPro’s model allows for flexible user management so you can allow investment teams and other consumers from your organization such as marketing and executive management to securely access results from the same portfolio. This means consistent performance and risk results and analysis are available throughout the entire organization – and available on a timely basis.

Want to know more? Ask Ian your questions using the comments section?