Putting data to work for investors: the power of advanced portfolio analysis and reporting

The recent headline-grabbing scandal regarding social media data harvesting has highlighted the immense power of data. Until now the majority of us would have laughed at the idea that our ‘likes’ could influence elections and topple political movements, but here we are. Outside of social media, the power of data has long been known and utilised within the financial services world. However, in this sphere, astute investment analysts and fund managers are examining asset-related data to identify opportunities and in turn produce better returns for their investors.

This is not always a straightforward process, of course, and has been subject to some significant limitations. But today, modern technology is substantially opening up the availability and scope of advanced portfolio analysis and reporting – allowing an increasingly varied spectrum of assets to be monitored effectively, and delivering benefits for investors across all levels.

The challenge of monitoring alternative investments

Institutional investors bear responsibility to their investors to balance risk and reward. They do this by utilising the tools available to them in the most cost effective way possible. The importance of portfolio monitoring and risk modelling for all fund managers is paramount to pre-empt any major fluctuations and hedge against them. As everyone knows: risk cannot be avoided, but it can be managed.

Risk modelling and portfolio monitoring require accurate and timely information, which is easily obtainable when those portfolios are made up of publicly traded assets or listed securities. However, as alternative assets become less and less “alternative”, even the largest and safest investment strategies now include a healthy slice of private equity and/or real assets for the benefit of diversification. Being able to collect and measure data on alternative assets is challenging at best and forecasting risk even more so.

Private equity and real estate investors may have oversight of their direct holdings, but fund-of-fund investors require a holistic and up-to-date view of their portfolios spanning diverse asset classes and geographies in order to confidently measure their exposure to any particular region, sector, industry or currency. This then allows them to react rapidly to any dangers that may arise – from natural disasters to controversial referendum results – and protect their investors. The indirect financial impact felt by world events outside of investor control can be better mitigated with enhanced data analytics and financial risk modelling.

Data collection and interpretation are key to success

There are two key aspects to portfolio analysis, both of which are being increasingly facilitated by advanced software. These aspects are collection and interpretation.

Collecting similar data from separate fund managers is necessary and this process needs to be as seamless as possible. Private company results can take time to prepare but need to be shared efficiently and quickly. Funds that hold a significant stake in any private asset will have enough influence to demand swift reporting, however minority investors may struggle to obtain the same information.

How is technology helping data collection? There are several online platforms and technological solutions out there that can help smooth this process by using shared cloud databases that enable direct input from all relevant stakeholders. This accelerates the entire process and reduces the reporting lag. Any reputable fund administrator will have knowledge and experience of these systems and can assist fund managers with procurement, integration and deployment.

Second is being able to transform the collected data into meaningful information that can be compared and analysed successfully. Directly comparing development costs in a property to the income from a debt loan fund is not helpful, nor is pitting Dollar interest rates against Euro interest rates (which are negative). Formulae are therefore required to flatten the data and calculate useful metrics. Visualisation and distribution of the findings is also important in order to make the information clear, easy to understand and readily available to those who need it.

How is technology helping data interpretation? Thankfully, there are now excellent data reporting tools available to achieve all of this. Some will even integrate with portfolio accounting and fund administration software. Consolidating these functions with one provider reduces the burden of managing different datasets in multiple locations and of course saves on costs as well.

Expect Moore

Moore Management has over 20 years of experience in fund administration as well as in-depth knowledge of portfolio analysis and reporting. Our in-house team of systems specialists utilises industry-leading software to collect, analyse and share fund portfolio insights on behalf of our clients. For more information on our technology platforms and capabilities, please get in touch.

To find out more and speak to one of our specialists

Get in touch

We are a First / Names Group Company