Empowering the Performance Team

Jeff Cullen, Principal Consultant and Vice President

Historically, performance measurement has been a discipline largely relegated to a supporting role within organizations both large and small, and performance teams have been responsible for what was primarily reactive and backward-looking analysis. Today, investment firms are, more than ever, looking to explore the possibilities of predictive and prescriptive analytics in helping to manage risk and improve performance. This requires an understanding of the consistency and quality of data across the firm, how to apply that data, and a skill in high-level analysis that spans across departments. It is no surprise that smart management teams have noticed that their performance teams are the nexus of exactly the type of data aggregation and skills best suited to unlocking this potential. At a recent discussion I took part in at TSAM Boston, one panelist noted: “Anything with a number attached to it is going to find its way to the performance team.”

That panel discussion, “Creating a Holistic Performance Measurement System”, focused on the nuances of these burgeoning capabilities. Joining me on the panel were performance executives from Aberdeen Asset Management and Acadian, while Bob Leaper, President of, served as moderator. Sitting with these delegates was a great opportunity to gain insight from talented professionals in the discipline to which I have dedicated my career at Eagle.

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PBOR – One Year On

A year after the concept of the Performance Book of Record was introduced, Rich Mailhos takes a look at its role in the global asset management industry now and in the future

Rich Mailhos, Product Manager, Eagle Performance

The Emergence of PBOR
It is nearly a year since the concept of a Performance Book of Record (PBOR) emerged from a research study we conducted in conjunction with WatersTechnology. The study highlighted the shortcomings among investment management companies when it comes to generating accurate and transparent performance and risk analysis across the enterprise and the need for a specialized solution to address these challenges.

Only 21% of the companies surveyed were very satisfied with their ability to access timely, accurate and relevant performance data with the overwhelming majority (72%) having to use multiple systems to aggregate their investment and performance data for management and client reporting.

The study started an important industry dialogue about the growing need for enterprise-level performance and risk reporting which has continued and intensified over the course of the year. It also appears to have, by reference, helped crystalize the industry’s thinking about the Investment Book of Record (IBOR), when it is appropriate and what its limitations are. Rather than a panacea, IBOR is one part of a solution to a more fundamental set of challenges facing the industry.

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Absorbing Complexity:
Build the Moat

Investment managers and financial services firms are confronting a rapidly changing competitive landscape and their infrastructure can be a critical gating item in their pursuit of new opportunities

Mal Cullen, Chief Executive Officer

Clayton Christensen, in his seminal book The Innovator’s Dilemma, catalogued the various patterns of innovation that can occur within a sector, establishing a spectrum that begins with the repackaging of known technologies and ends with truly disruptive innovation that can turn an industry on its head, such as Uber or Napster. While the financial services sector has not faced the latter scenario in the past quarter century, the rapid growth of the alternatives space, coupled with new advances that have commoditized what were once considered exclusive and esoteric strategies, means that investment managers today are only now being faced with the question that Christensen so poignantly addressed in his book: How do you introduce new products and capabilities without being bound to servicing the customary needs of existing clients. The difference, at least for most financial institutions, is that, it is their existing clients who are calling for disruption.

Traditional asset managers realize that product innovation has become more critical than perhaps ever before. As McKinsey identified in a December, 2014 research paper (“The $64 trillion question: convergence in asset management”), certain secular factors are driving asset managers to build out their product set to meet the heightened and more expansive demands of their clients. The McKinsey research cited that a bifurcation is occurring between large and small institutional investors, with each group approaching their strategies differently to fulfill diverging portfolio needs. Whereas smaller institutions want access to a broad range of brand-name managers with product depth and perceived stability, larger institutions are migrating to more cutting-edge portfolio construction to build new capabilities and embrace “risk-factor-based methodologies.”

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Fixed Income in an Evolving Europe: Can You Measure the Permanent Impact of the Eurozone Crisis?

João Sousa Dias, Solutions Specialist, Eagle Investment Systems

Financial and political events since the onset of the financial crisis in 2008 have redefined sovereign risk in the eurozone. The disruption and its lasting impact has left fixed income investors searching for answers when it comes to measuring their “true” European exposure and determining the appropriate government yield curves to benchmark against. Many existing portfolio analysis and performance attribution platforms struggle to accommodate the new paradigm, which requires a new approach to fixed income performance reporting.

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LDI Strategies, Back in Vogue, Require Technology and Data Underpinning

Joel Kornblum, Managing Director

As liability-driven investment strategies move to the forefront, capabilities in measuring performance and risk can make or break these initiatives

For much of 2015, The CBOE Volatility Index (VIX Index) has resided near historic lows, reflecting a level of complacency among market watchers who had grown accustomed to an accommodating Fed policy and more than five years of nearly uninterrupted growth in U.S. equities. At the end of August, however, investors snapped to attention as volatility ratcheted up significantly and the VIX, also known as the “fear index,” logged its largest-ever weekly increase. For plan sponsors, particularly those managing defined benefit plans or insurance assets, the re-introduction of volatility offered a timely reminder to the value of liability-driven investment (LDI) strategies.

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FINcastle’s CEO Bevin Crodian Shares Thoughts in a blog contribution titled
Embracing Change:
Wealth & Technology

Bevin Crodian, CEO, FINcastle Consulting

With the entrance of roboadvisors, wealth management firms with actively managed products are forced to take a closer look at finding ways to reduce fees and automate reporting. The opportunity to gain a competitive advantage through a scalable and efficient technology platform has never been greater.

From the perspective of mass affluent investors, the wealth management industry is still considering the direction that the so-called roboadvisors will pull the industry.  A couple of items are clear though, which is that the roboadvisors are driving an increasing focus on fees and technology, and that this trend will ultimately trickle up to the higher net worth markets.  If nothing else, full-service providers will have to equal or exceed the client-facing technology of these new entrants, and full-service fees over time will have to move closer to those of the roboadvisors, at least for parallel products and services.  Specifically for the actively managed allocations of separate accounts, fees will likely come down substantially.

If there is a positive outcome that stems from this fee compression for wealth managers, it’s that the industry will likely take a renewed look at fees and may come away from it with a better sense of best practices and greater standardization. There has been so little attention paid to the accurate description of fees in the wealth management industry that some have claimed advisors themselves consistently underestimate the total fees being paid by their clients. The roboadvisors are sometimes equally unclear about the total fees charged to clients.  In fact, when many in the industry refer to fees, they are just talking about the advisor’s share, rather than the total cost of ownership.
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Key Principles Serve as Cornerstone to Successful Data Governance

Paul McInnis, Head of Enterprise Data Management, Data Management

A recent survey conducted in collaboration between Eagle Investment Systems and WatersTechnology revealed that while industry participants are feeling the pressure to put in place formalized data governance policies, these efforts largely remain at an impasse. A number of challenges, be they cultural or related to available resources, stand in the way. Anecdotally, however, we’ve found that in many cases, large organizations often don’t know where to begin when it comes to drafting a data governance policy.

The survey and its accompanying white paper, “Command and control: Establishing a formal data governance strategy,” can be found here.

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Q&A with Eagle’s Robert Erman

Rob Erman, Head of Global Professional Services, Eagle Investment Systems

Eagle Investment Systems’ Head of Global Professional Services shares implementation best practices and highlights on how clients can get the most out of their solutions.

Q. You’ve been with Eagle for nearly a decade now as the Head of Global Professional Services. Can you discuss what that role entails?

A. Over my tenure at Eagle, we have seen our business grow and the expectations of our clients rise dramatically.  With our leadership in the industry, clients expect us to help them improve their operation by implementing our technology. I oversee a team of more than 200 people and we work diligently to ensure we have an optimized and repeatable implementation plan, so when clients sign on with Eagle they understand not only how to use the software but also how to fully leverage the power of the Eagle platform. We’ve done this hundreds of times, so we are able to steer clients down the right path with sound proven ways of doing things. Within Eagle, I want to make sure my team is communicating daily and sharing best practices, because that institutional knowledge is incredibly valuable to clients and can really accelerate their time to value.

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Enterprise data management is about more than an operational data store

Marc Rubenfeld, CIPM, Head of Eagle Solutions EMEA/APAC

dmSome think when it comes to enterprise data management systems that it’s purely about the integration and validation of different data from different sources and its movement downstream for use elsewhere in the business. This was certainly a view I heard repeated at a recent conference I spoke at in London that attracted business, data and IT professionals from investment management firms across Europe.

While handling active, current operational data is a crucial element of data management, it is just one aspect that is more appropriately described as an operational data store (ODS). There are other aspects, such as enriching, mastering, warehousing and “mart-ing”, that make data management a much broader discipline that can underpin fundamental processes and functions across the whole business.

Take the handling of accumulated historical position data to provide a permanent book of record, for example. Often referred to as the data warehouse, this is an incredibly powerful area of data management. Managed correctly, this data has the granularity, detail and analytical capacity required for risk management, performance measurement and attribution, regulatory reporting and compliance monitoring. It’s here – rather than in the ODS – that different asset classes, like private equity or real estate, are typically merged with equities for portfolio-level analysis. Not all data management systems provide this warehousing function and instead focus solely on the ODS side of things, but in order realise the full potential of their data, firms need their EDM platforms to be able to do both.

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Harmonizing Babel: Business Ontology Standards in Focus

Paul McInnis, Head of Enterprise Data Management, Data Management

Business Ontology Standards in FocusThe Wall Street Journal, in a headline six years ago, asked: “Are dictionaries becoming obsolete?” The article, to the chagrin of some traditionalists, implied that if the dictionary wasn’t yet obsolete, than the end would be approaching soon. Yet, in an era when even Scrabble saw fit to adulterate its official dictionary it with millennial slang — be it “lolz,” “lotsa,” or “ridic” — hope remains for the traditionalists, as best practices in data management are driving the adoption of thorough and comprehensive business glossaries. At this point, advocacy may be isolated to data scientists and CIOs, but make no mistake, appreciation and the demand for precision around ontology standards is growing as this uniformity, or lack thereof, is among the larger “gating” items for large-scale enterprise data management projects.

For the uninitiated, a business glossary is the definitive reference guide that establishes and cements a standard for business terms and relationships across an enterprise. In an era of ever-sprawling financial institutions, in which organizations stretch across regions, asset classes and cultures, a definitive business glossary is critical to engender a common understanding around what each term means for all employees and business partners, and in all cases.

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