How to manage complexity with a true total portfolio view

Navigating more complex asset classes 

The world of pension fund investing is more complicated than ever before. Legacy technology is only compounding the problem. With the model of combining point solutions with delayed custodial data, it is that much harder for pension leaders to recalibrate investment strategies to cope with change. 

Faced with a shift in rates staying higher for longer, the pension industry needs to make new adjustments to their asset allocation on top of grappling with an ever-widening range of instruments and the operational complexities that come with it. 

The latest trend in the pursuit of uncorrelated returns has been the move into private credit—a booming sector that is projected to reach USD 2.3 trillion by 2027 according to investment data company Preqin Ltd.¹ However, pension funds’ initial enthusiasm for this asset class is being tested with growing concern about the potential effects of higher borrowing costs in addition to the lack of transparency and regulation in this space. 

Pension funds need to be ready for a quick market pivot that will impact their investment strategies at all times if they are to effectively manage a true multi-asset portfolio. This will require having the right data, at the right time. This means an investment management platform that can deliver information in real-time.

The race for change: Optimizing the search for the highest risk-adjusted returns 

As pension leaders run more complex, multi-strategy portfolios, they require an intuitive system that combines all instruments—from public and private markets, as well as internally and externally managed assets—to give a holistic view of the fund’s positions, exposures and performance. Only then, they can have the confidence to be making the right investment decisions.   

Given the abundance of data points that many organizations now must contend with, the consistency, accuracy and the downstream effect of real time information and analytics is critical.  

Pension leaders need to be able to see the fund portfolio, in both normal and stress scenarios, to adjust their diversification strategies and find the capital gain/yield to support payouts. 

In an era of digital and AI, speed and precision are of the essence. Pension leaders must also be thinking about this new operating reality or risk falling behind. Moving faster demands transparency and tight coordination across the entire investment value chain. 

Imagine one fully integrated investment platform, designed for purpose, for the end-to-end investment lifecycle, operating on the same data, valuations, (public or private market) positions, analytics, performance, cash and all the critical compliance checks with your regulators to deliver clarity to your business and the consistent precision needed for faster time to value. 

It is this single source of truth flowing seamlessly through a series of automated, cost-effective processes that enables a total portfolio view in real time and brings the answer to pension leaders’ most pressing concerns: 

• Private markets: how well do you understand the underlying managers’ investments and portfolio companies and exposure to the same? 
• Stress testing: how well are you able to model/stress test the robustness and liquidity of your portfolio? How about changes in the volatility/ correlation regime or the impact of geopolitical events and climate change?

The path forward: Gain much needed simplicity for precision and speed

Today, you can rely on one platform with seamless and intuitive workflows throughout the investment lifecycle based on a single source of data, whatever your investment needs. Liability driven investing, private or public market investing, you can manage them all in one place with a true total portfolio view— ensuring that all rules are tested, risks are monitored, and performance is reported on consistently across the investment value chain. 

Looking further ahead, the clear goal for pension leaders is better integration of new technology – such as AI or improved platforms for investment management and accounting. To decrease siloes between technology and investment in order to boost efficiency and productivity, having access to real-time data across the investment value chain is the critical first step.

Learn how you can achieve a total portfolio view with SimCorp One ➔

Reference

¹ Preqin Special Report: The Future of Alternatives in 2027, Preqin