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Total portfolio management: Dream or reality for today’s asset managers?


Ashish Aryal
Senior Market Strategist

My total portfolio view moment

April was obviously an uncomfortable month for investors. We had geopolitical tensions between Iran and Israel, we had a third consecutive month of higher-than-expected inflation prints in the US, and in between all that, we were in full-swing earnings season. 

I was probably refreshing my pensions’ portfolio value more often than is considered healthy amidst the constant stream of news. Do you know what action I took? None. Yes, correct. I held on, avoided the discomfort, and maintained a low-risk approach. It proved to be the right choice. US stocks had recovered from the pull-back going into May. 

The point is, I had the advantage of a consolidated view across my personal investments, so I had all the data I needed to understand which sectors and securities I was most exposed to across the board. I effectively had a Total portfolio view which gave me the confidence to not make any irrational investment decisions. The key in all of this was having the data about my portfolios and holdings in one place. Had the data been scattered across different systems, I would have felt less under control. This becomes even more apparent for portfolio managers managing billions on behalf of their clients.

What is total portfolio management?

Asset Managers have long wanted a holistic, real-time view of all assets, public and private, at their fingertips. Such an aggregated view is what we call Total portfolio view and is a direct result of adopting Total portfolio management. Total portfolio management isn't just about integrating portfolio positions. It’s a way of running your business, spanning into the management of disparate and new data sources, incorporating flexible and innovative technology, and also unlocking the traditional trade-off between scale and agility that legacy technology stacks inherently present.

It gives you confidence and control: you achieve a 360 view of how diversified your assets are, you have confidence in your cashflow numbers, you're able to pinpoint risk exposures, and you also have the right data at your fingertips to allow you to stress test new unpredictable market scenarios and their impact to valuations.

“Asset Managers have long wanted a holistic, real-time view of all assets, public and private, at their fingertips. However, it’s all too common to think of data as a cost. We see it entirely differently: you need the right data, to have the right conversations.”

What does it take to get to total portfolio view? 

To achieve Total portfolio view, you need the right technology and systems powering your investment teams. The first step is to re-position business mindset. It’s all too common to think of data and technology as a cost. We see it entirely differently. We see them as value-adding differentiators, providing insights, and this view is increasingly prevalent in the market. I spoke recently at TSAM’s London Conference, and panel members agreed. One quote I heard stuck with me after the event: “You need the right data, to have the right conversations”. 

The reality in terms of where asset managers are is a little different: asset managers have grown over time, usually starting in one specialist asset class or strategy, and then diversifying into different asset classes. That often means multiple systems layered on top of each other, often struggling to speak to each other and requiring significant resources to ensure are working smoothly. There is appreciation for the common data layer, but inertia in terms of how to get there. We're effectively in a costly, retro-fit: many asset managers I speak to are still figuring it out. 

So is total portfolio management even realistically possible in practice for asset managers? 

We eventually arrive at the key question: does an all-in-one cross-asset solution actually exist? Is there a magic unicorn which provides a total portfolio view across traditional investments in Equities and Fixed Income, and also non-traditional assets such as Private Equity/Debt, Real Estate, Infrastructure and Hedge Funds? The truth is somewhere in the middle, in between the magic all-in-one solution which delivers scale, and a specialized combination of point-based solutions which inevitably suffer from data breaks and frustration. 

This takes us full-circle to my original point above: the most effective method is to consolidate your data and operations on a common core platform. Let the core platform be your data backbone, feeding data across your organization in the most automated way possible. This frees up time for your organization. Future proof platforms such as SimCorp One do exactly this and allow you to implement your investment identity on top of this core framework. This means implementing your in-house tools and secret sauce investment ideas, while also having access to our open ecosystem of Fintech partners and third-party specialist data providers who are constantly pushing the innovation boat. Easy access and smooth integration. 

Bringing it all together: how to get started 

First and foremost, focus on getting your data under control. Implement a core data layer, a single source of truth. Everything else rests on this. 

Be clear on what your future operating model should look like: do you want to focus just on investment decision making? Are you outsourcing some of your operations or keeping control of it? At SimCorp, we take a considered and low-risk approach to implement the right target operating model to drive your growth ambitions 

What does total portfolio management look like to your organization? There is no right or wrong answer. The only right answer should be that your operating model enables you to be nimble and ready for growth 

  • Will you implement your own in-house tools on top of the core platform? 
  • Will you cut costs by standardizing non-differentiating tasks? 
  • What data sources are you going to use to uncover new investment opportunities? 
  • Are you able to test market scenarios in real-time and position your investment teams for change? 
  • How are you leveraging AI to increase your speed and intelligence to market? 

The cost of inaction 

The far opposite of this holistic approach is to still be burdened by operational processes which slow down your speed to action, and in worst-case scenarios, inertia and inaction. 

I will finish off this piece by highlighting the cost of inaction: according to BCG's latest annual Global Asset Management report which highlights the inherent risk in business models, a staggering 90% of asset management revenue growth over the past two decades has come from market performance as opposed to net flow revenue which has been neutralized by fee compression. If market performance is largely uncontrollable then we are implying that this revenue growth is also at risk. We know fee compression is ever-present, and fewer new products are surviving despite attempts at innovation. But that doesn’t mean asset managers should stop innovating and striving for efficiency. The cost of standing still could be a drop in annual revenue growth of 10% to 5%. 

Your business needs focus. It craves insights. And it runs on decisions. Because from front to back, from managing risk to making investment decisions, from execution to accounting, and through client reporting, you need consolidated data and real-time analytics through a single trusted source of data truth so you can move from reacting to anticipating, and confidently decide. We are in the Decision Era

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

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