Analytics – Enhancing the power of data

When it comes to data, Peter Druker’s words hold true, “What gets measured gets managed”. In the post recession times, financial firms are truly getting into the depth of his words.

Financial firms have been creating, managing and storing data for decades with the help of technology. But post the economic melt down, the need for extracting value from all data sources, both internal and external have become a business imperative. Customers and regulators demand greater transparency and more information.  Asset managers, who were once content to revisit risk models quarterly or monthly, now need access to information on a much more granular and regular basis. This means they have little choice but to invest in analytics solutions and dashboards to improve the kind of information they are receiving and interpretation of the same.

Traditionally, analytics and risk management systems were established to meet the regulatory requirements or for investor reporting purposes. It was never used for decision-making purposes. Today companies are thinking beyond risk management systems to identify investment solutions to develop strategies, improve oversight and also to communicate and create transparency for investors in real time. Portfolio analytics gained momentum as institutions started searching for ways to use data not only as a detailed re?ection of the recent past, but also as a peek into the future.

Solution providers like StatPro realized this demand for a complete portfolio analysis and reporting platform among asset managers and came up with solutions that have a broad coverage of instruments and can be truly integrated across asset classes (and even across the whole enterprise). These tools help asset managers to effectively quantify and correlate portfolios and markets and address the daily challenges of portfolio management with unbiased information and analysis. It could also provide senior management with a holistic view of risk across the enterprise.

The power of data

Am I taking into account all aspects? Is my asset allocation fully optimized? What new challenge should I expect? How can I attribute my performance more clearly? How to give clients a holistic view? For asset managers, the key to many of these questions lies in exploring, understanding and analyzing data in multiple ways.

Highly defined, feature enriched platforms are gaining traction among asset managers. The ever-expanding investment horizon into new geographies and new investment streams too presents enormous challenges of evenly modelling portfolios and markets in the scope, detail and timeliness of financial data. In the wake of such challenges, asset managers need solutions that can address market crowding, pricing inefficiencies, risk and rebalancing. In a recent study conducted by BNY Mellon, clients highlighted the importance of stress testing on portfolios. Scenario analysis and stress testing functions, which have predictive capabilities that can provide insight into the merits and demerits of investment strategies, are considered vital to a portfolio analytics solution.

A dashboard is a very common feature in the tech world. But for asset managers, this tool that centralizes information and presents it in a highly visual manner is a critical one. It helps them to synthesize key data and apply holistic tools swiftly to correlate, interpret and extract meaning from all angles into one location. Clients too can view their portfolios from a performance, risk and return perspective in detail.  Another interesting trend observed in the industry is the growing emphasis on highly accurate attribution. Breaking down portfolio performance into smaller constituents and analyzing the differences in performance and investment decisions is a strategy today adopted by many asset managers especially in the fixed income side.

Adapting to new environments

While it is true that asset managers are looking for solutions that can help them share information with all stakeholders, help them increase business and retain clients through better communication and transparency, cost reduction is the need of the hour as the industry is still recovering from the pangs of the economic meltdown. With budget freezes and IT expenditure cuts rampant, investment in heavy infrastructure for a portfolio analytics solution is nearly impossible. But thanks to the proliferation of cloud computing, such tools and platforms are being hosted in the cloud and can be accessed from a browser. Along with minimum infrastructure needs and a pay as you go model, many products today relieve asset managers from investing in development, maintenance and licensing of software and application while ensuring privacy and high levels of data security.

The explosive growth of mobile devices and penetration of mobile applications have increased the demand for real-time data on the small screen. Asset managers and their clients too want to keep pace with their portfolio at all times and making decisions on the go to gain competitive edge.

However, technology alone cannot resolve the investment challenges of the industry. It should go hand in hand with the human factor – experience and knowledge of financial practice to bring positive investment outcomes.

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