The performance reporting needs of a small, domestic funds manager can be less different from that of a global behemoth than you might think, writes DST International CEO, IAN MATHIESON.

When we consider the importance of scalability in performance solutions, it is often assumed that this characteristic is only applicable to huge firms with hundreds of thousands of accounts and millions of positions, when in fact we regularly see mid-sized, or even small managers, producing more analysis than firms with far higher ‘volumes’, in the traditional sense.

A good example of this is one of our institutional clients, which manages less than 800 portfolios but produces over six million return and attribution statistics per day. This puts them in the same ballpark as a wealth manager providing daily account level returns for its five million clients. In fact it is often the smaller, more specialised investment firms that require more detailed analysis for their clients and portfolio managers. A major differentiator for such firms is the ability to offer a highly personalised and customised service, and this inevitably brings with it the burden of producing very detailed and specific analysis and reporting.

A further point in need of clarification is the definition of a scalable performance system. It is sometimes assumed that as long as you can horizontally scale and achieve extreme processing scalability, the job is done. However, this is only one piece of the puzzle. The reality is that in the absence of operational scalability it really doesn’t matter how quickly you can churn out millions of numbers, if at the same time you don’t feel confident when you distribute them to your clients because the numbers remain unchecked and unproven.

In order to achieve true scalability, the solution simply has to be exception driven. It must alert the performance team to possible issues with data and results without the need for them to ‘hunt around’ for problems. The flexibility of this exception or tolerance checking becomes more crucial as markets evolve and become more complex and differentiated. We see asset managers diversifying from traditional investments such as equity and fixed income into derivatives, both exchanged traded and over-the-counter, as well as private equity and real estate. All of these investments have their own unique return profiles and unless the system recognises this diversity, too many exceptions and ‘false positives’ will be raised and the performance team’s time will be wasted.

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