While the survey results are worrying, the good news is that it is possible to improve processes and automate workflows, which in turn allows for better investment decision making. However, the life of a portfolio manager is often fraught by multiple systems, Excel sheets and frequent manual manipulations in order to gain an up-to-date 360º view of investments.
The survey, taken during the ‘Risk & Performance Analytics: Making the Front Office a Better Place’ webinar, polled 54 individuals from 34 firms across North America, revealed that:
- 76% of portfolio managers claim that they do not have the ability today to see the full range of risk figures and performance numbers for their total portfolio in one place and act upon them from there.
- An overwhelming 89% of portfolio managers surveyed cannot see on-demand performance and risk figures based on the latest positions and market data intra-day.
- Less than half can drill down to the underlying prices, security master, and transactions for their positions.
- Only 39% can easily perform pre- and post-trade compliance checks on risk figures for their total portfolio.
These figures trouble me. When making investment decisions, timing is critical. Without fast, efficient, and automated workflows, asset managers often find themselves having to manually identify, investigate, and resolve discrepancies and errors, which can detract from the investment process. A modern front office provides clean and real-time data, an instant overview of the impacts of investment decisions and automated workflows for all asset classes and geographies.
A recent white paper from TABB Group, Breaking Down Buy Side Barriers: Achieving Alpha through Agility, supports SimCorp’s findings and discusses how the technology infrastructure that a financial firm adopts can have resounding repercussions both for the company and its clients. The findings revealed that one of the key obstacles to achieving alpha are trade errors caused by erroneous positions and the time then spent resolving those errors.
The paper stipulates that in order to grow and scale, it is imperative that firms’ front office applications such as trading and risk platforms are able to speak to each other in the same language, as well as to any other supporting system such as performance measurement and accounting. More importantly, these front office applications need to contain a golden copy of every piece of information that passes through the back, middle and front office without lengthy system reconciliations that can delay the investment process. Inconsistencies and discrepancies that arise in an order management system or risk analytics package can have multiple – all negative – consequences.
When I talk with clients, the input is clear, the front office needs to focus on alpha generation, not error remediation. Having accurate risk and performance analytics readily available can make all the difference.