CutterAssociatesâ industry-leading research division and benchmarking survey work.
"Investment systems managers and operations professionals are often measured by their ability to deliver high-quality results â on-time and on-budget," says Mark Bobseine, President, CutterAssociates. "However, performance has different meanings depending on an individualâs role in the organization. The CIO thinks of operating cost and system performance; business clients want extensive functionality and ease of use; the COO measures process efficiency and risk mitigation; and the CFO looks at ROI. They are all valid approaches. And they each have the expectation that these investment systems managers and operations professionals will improve performance over time."
"CutterBenchmarking will work with firms to define the metrics needed to evaluate operational effectiveness and to assess technology and operations costs", offers Robert Klehm, Managing Director, CutterBenchmarking. "Firms will be able to compare their performance against others in their peer group.
Armed with this information they will be able to prioritize their technology investments and process improvements. Over time, they will also be able to chart improvements in performance and continually gauge the companyâs operations against âbest-in-classâ achievers."
All investment management firms collect at least some operating data to assess their ongoing performance, and they use this information to re-align initiatives or defend budget requests. While this process works, it suffers from "measurement myopia". Without any external comparison it is very difficult to differentiate which initiatives require the most attention, pose the greatest risk and promise the greatest return. If a firm observes that some of its peers excel at trading, they might want to raise the bar on their own trading capabilities. If an organization is having difficulty implementing algorithmic trading and find that all of the companies in their peer group are facing the same challenges, they could modify expectations for this effort
without incurring the wrath of traders and other business users.
"Based on more than ten years of research and consulting in investment management systems and operations, CutterAssociates has identified the key metrics that investment management firms need to effectively assess their operations performance," stated Mr. Bobseine. "For each function CutterBenchmarking defines the most appropriate metrics â those categories that are most useful for recognizing achievement and that are actually measurable."
"Driven by the rapid changes in trading practices and technology, we will focus initially on trading," stated Mr. Klehm. "Market-leading firms are using trading technology to enhance portfolio performance, lower trading costs, lower operational and market risks, and optimize trading strategies. Metrics will include information on order placement sophistication, trading strategy, trade cost analysis, broker evaluation and selection, program trading capabilities, block trading, liquidity analysis, connectivity, etc. The sum of these metrics provides a balanced and holistic view of a firmâs entire trading operation."
CutterBenchmarking will collect data annually from each member firm and prepare a benchmark report for the entire group, as well as for each peer group. In addition, CutterBenchmarking will identify best practices
for each functional area and analyze the data for trends and anomalies. Assessments and the detailed report will be available only to CutterBenchmarking members.