Northern Trust launches enhanced analytics service for fixed income performance attribution

28 August 2008

Northern Trust’s Investment Risk and Analytical Services (“IRAS”) group has launched an enhanced version of its fixed income performance attribution analytical tool. The enhanced tool uses multiple sources and types of fixed income characteristic data to customise attribution analysis for fixed income investments. It is available to clients daily via Passport, Northern Trust’s online institutional-client reporting system.

The tool, which is available globally, is aimed primarily at asset managers to help them pinpoint where performance is coming from in their portfolios’ fixed income holdings. Furthermore, the tool also helps asset owners to better judge decisions made by their chosen asset managers.

“Fixed income is a relatively opaque asset class compared to standard exchange-traded equities and, consequently, it has historically always been harder to obtain detailed, daily performance attribution analysis on fixed income holdings,” said Jim Trotter, head of IRAS in Europe, Middle East and Africa at Northern Trust. “Our new tool is the next generation in fixed income attribution analysis and is completely customisable to meet the requirements of each asset manager client depending on its individual investment process for fixed income.”

The Northern Trust tool uses three main characteristics data categories on which analysis is based:
• Instrument type
• Duration data
• Yield data

For each of these characteristics categories, there are number of measurement criteria, called factors. Northern Trust has added new factors within the duration data category which means that more data can be fed in to the tool to provide more detailed, meaningful performance attribution analysis for fixed income.

“Increasingly, the trend is for asset managers to provide more performance data to institutional investors and, importantly, to be able to explain where performance is coming from – and where it isn’t. At the same time, asset owners are demanding increased transparency around their investments. Our enhanced fixed income analytics tool is the latest in a series of strategic developments to provide specialist performance and risk analytics solutions to asset managers and asset owners,” commented Mr. Trotter.

Previous, recent announcements from Northern Trust have included the launch of a daily risk monitoring service, the launch of an enhanced compliance monitoring service and the launch of a new custom liability benchmarking service.

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