Eagle Investment Systems LLC, a BNY Mellon company and leading provider of financial services technology, has today released a white paper outlining how investment firms can measure and attribute investment performance and perform risk analysis across their entire organization.
The white paper, called Characteristics of a Performance Book of Record, outlines the common challenges and limitations encountered by investment firms when attempting to measure and analyze performance across all of their asset classes. It outlines how Eagle’s approach extends the benefits of a consolidated Investment Book of Record (IBOR) solution to enable firms to build a consolidated ‘true’ view of their performance results, exposure and analysis; effectively producing a Performance Book of Record (PBOR).
“Many investment firms are finding it increasingly difficult and time-consuming to answer the questions being asked by regulators, clients and senior management teams due to their limited performance system’s capabilities,” said Rich Mailhos, Product Manager at Eagle Investment Systems. “The approach outlined in this white paper will not only help firms meet their reporting requirements more consistently, effectively and efficiently, but will also improve their understanding of risk and drivers of performance to enable better, more informed decision-making across the organization.”
The paper highlights a number of guiding principles for firms looking to developing a PBOR, including:
- Ensuring it supports multiple sources of data, which are traceable back to the original source;
- Flexible error handling and data validation tools that enable exception-only workflow monitoring;
- Powerful data quality monitoring tools to judge data based on business rules;
- Sufficient granularity to ensure details are tracked, for example, by asset type;
- Data enrichment tools to address lag priced assets, notional exposure based instruments and multi-legged returns;
- Flexible analytical capabilities that leverages multiple benchmark relationships;
- Flexible analysis for composited portfolios or nested composites hierarchies (as needed to replicate global strategic asset allocations, fund of fund pools, or High Net Worth managed accounts business and investment models);
- Flexibility to integrate historical returns of differing periods.
A recent research study conducted by WatersTechnology points to the industry’s trend towards more regular, comprehensive and transparent reporting to suggest that the Performance Book of Record (PBOR) is likely to become a familiar feature among investment management firms. Its research revealed the complexity that firms face when it comes to measuring and analyzing performance with over half (60%) using two or more systems to calculate performance across different client types and 9% using ten or more different systems. It is no surprise that only one in five (21%) firms are very satisfied with their ability to access timely, accurate and relevant performance data.