Clearwater Analytics 8 Step Guide
®
Eight Step Guide to Build a World-Class Investment Strategy and Reporting Process During times of market uncertainty, investment
professionals need all of the information they can get to make smart decisions about their portfolios. In today’s market, investors can’t be days or weeks behind in knowing what they own, or they put portfolio investments at risk. With a large percentage of organizations still relying on outdated manual processes, forwardthinking organizations need to take a closer look at automated reporting technologies to streamline processes, improve productivity and facilitate smarter investment decision-making.
To assist organizations in making the shift from
manual to automated investment reporting practices, Clearwater Analytics, the market leader in web-based portfolio reporting and analytics, developed best practice guidelines that organizations can use to build a world-class investment management and reporting strategy.
“With volatility in the markets, organizations simply can’t rely on the same old manual processes they’ve used for years,” said Christopher Growney, a founding partner of Clearwater Analytics. “Investors have a responsibility to understand and address the global risks inherent in their investment portfolios. With so much uncertainty in the marketplace, investors that rely on spreadsheets lack the intelligence they need to mount a proactive response to market events that can significantly impact portfolio performance.”
Investors with a complete and automated in-
vestment process gain many benefits, including access to current, actionable investment information that can result in better returns. In addition a streamlined investment process can improve productivity and reduce or eliminate financial reporting errors. To automate your investment reporting process, consider the following eight steps:
®
Phone 800.250.7543 | www.clearwateranalytics.com/demo
1. Measure Processes Against Current Investment Objectives Identify which stakeholders need to be involved in the process and explore the following questions: What are our investment objectives? What questions do we need to answer? Where are the challenges? What investment reporting needs do we have today that cannot be satisfied through manual processes? Explore the organization’s “must-haves” to meet current and future investment objectives. After considering these questions, ensure that all stakeholders, from the investment board to internal investment professionals, align on the investment objectives. 2. Implement a Solid Investment Policy Synthesize the feedback from step one into a concrete investment policy that specifically articulates the dos and don’ts around risk and return in clear language. The policy becomes the lens through which all investment decisions are viewed and clarifies the return against the risk the organization is willing to take on any given investment decision. When drafting investment policy recommendations, define roles and responsibilities, investment manager hiring criteria, portfolio management assumptions, compliance violation processes, benchmark criteria, reporting requirements and policy review timelines. Combined, these foundational elements will serve as the framework to build and execute the investment policy.
necessary to make the infrastructure effective. 4. Standardize and Automate the Transparent Information Required across the Portfolio Ensure the organization has access to accurate, consistent and complete information to make educated, proactive decisions. Standardize the transparent information required across the entire portfolio. Select a vendor that independently verifies and confirms all cash movements and accounting entries. There are significant consequences for having noncomparative information. Daily verification and data scrubbing is critical for an accurate accounting of risk, performance and financial reporting. If transactional data is wrong, both accounting and risk data will be wrong. Fortunately with automated reporting tools, investors can swiftly and accurately gather, synthesize and act on market challenges. Organizations that move to automated reporting solutions can recoup costs in a relatively short period of time¹. To evaluate vendors, consider the following questions: • Can they consolidate, normalize and validate data from multiple sources? • Do their tools provide meaningful information? • Is their information accurate? • How easily can reports be shared across the enterprise or externally? Source: ¹ Association for Financial Professionals Survey, October 2008, Treasury Benchmark Survey
5. Continually Assess Risk to Improve Performance
3. Develop Your Investment Infrastructure With the investment policy defined, assemble a team of investment managers, custody, reporting and analytics experts who can implement and monitor the investment policy. Determine what kind of expertise is needed. Evaluate what measurable success they should have. Decide what investments should be managed internally or externally and the processes
Organizations need daily, transparent insight into their holdings to assess exposure to market events. Vendors that offer best practice tools can help monitor risk characteristics in a variety of formats that are easy to understand by stakeholders, including non-financial professionals. Best practice risk reporting solutions monitor portfolio risk concentration measurements,
®
Phone 800.250.7543 | www.clearwateranalytics.com/demo
including duration, sector, credit and issuer concentrations and reconcile accounting balance sheets against transaction detail provided by custody banks and investment managers.
8. Streamline Financial Reporting and Auditing
6. Monitor Compliance to Minimize Costly Violations The consequences of investing outside of investment guidelines can be significant to an investment portfolio. Choosing a compliance tool that is consistent, accurate and timely, with regard to notification of compliance violations, is critical to keep a portfolio in line with an investment policy. Because the nature of investment portfolios is dynamic, moving with market events and investor trades, daily compliance monitoring is vital. Successful compliance monitoring requires the creation of mathematical rules that mirror the investment guidelines. Starting with the organization’s investment policy, consider the following questions: What rules can be measured? What rules should your organization enforce? How should compliance violations be handled? Who should be notified of compliance violations? All of these questions are critical to developing and implementing a solid compliance process. 7. Regularly Measure Performance and Risk Against Benchmarks and Established Objectives Automated investment performance reporting is critical. Investors need to know what decisions enhanced the portfolio and what decisions detracted from the portfolio. By evaluating performance and risk against benchmarks on a regular basis, investors get meaningful information on relative performance and the decisions which created the outcome. Performance reports should be able to compare not only managers against their benchmark, but also managers against each other. Selecting appropriate benchmarks is vital. The value of benchmarking can be significantly improved with automation.
The consequences of inaccurate, incomplete or late financial information can be severe. Automating third party verification improves accuracy and timeliness. To safeguard against inaccurate reporting, consider using a provider that automates creation of SEC disclosures and that issues a SAS70 Type II audit report.
About Clearwater Analytics Launched in 2003, Clearwater Analytics reports on nearly $400 billion in assets for more than 2,000 institutional investors globally. The company’s industry-leading technology is the only platform on the market to offer a complete platform for dynamically monitoring global investments on a daily basis. To schedule a free demonstration of Clearwater Analytics technology and services, visit www.clearwateranalytics.com/demo, call 1.800.250.7543, or email [email protected]
®
Phone 800.250.7543 | www.clearwateranalytics.com/demo
Eight Step Guide to Build a World-Class Investment Strategy and Reporting Process During times of market uncertainty, investment
professionals need all of the information they can get to make smart decisions about their portfolios. In today’s market, investors can’t be days or weeks behind in knowing what they own, or they put portfolio investments at risk. With a large percentage of organizations still relying on outdated manual processes, forwardthinking organizations need to take a closer look at automated reporting technologies to streamline processes, improve productivity and facilitate smarter investment decision-making.
To assist organizations in making the shift from
manual to automated investment reporting practices, Clearwater Analytics, the market leader in web-based portfolio reporting and analytics, developed best practice guidelines that organizations can use to build a world-class investment management and reporting strategy.
“With volatility in the markets, organizations simply can’t rely on the same old manual processes they’ve used for years,” said Christopher Growney, a founding partner of Clearwater Analytics. “Investors have a responsibility to understand and address the global risks inherent in their investment portfolios. With so much uncertainty in the marketplace, investors that rely on spreadsheets lack the intelligence they need to mount a proactive response to market events that can significantly impact portfolio performance.”
Investors with a complete and automated in-
vestment process gain many benefits, including access to current, actionable investment information that can result in better returns. In addition a streamlined investment process can improve productivity and reduce or eliminate financial reporting errors. To automate your investment reporting process, consider the following eight steps:
®
Phone 800.250.7543 | www.clearwateranalytics.com/demo
1. Measure Processes Against Current Investment Objectives Identify which stakeholders need to be involved in the process and explore the following questions: What are our investment objectives? What questions do we need to answer? Where are the challenges? What investment reporting needs do we have today that cannot be satisfied through manual processes? Explore the organization’s “must-haves” to meet current and future investment objectives. After considering these questions, ensure that all stakeholders, from the investment board to internal investment professionals, align on the investment objectives. 2. Implement a Solid Investment Policy Synthesize the feedback from step one into a concrete investment policy that specifically articulates the dos and don’ts around risk and return in clear language. The policy becomes the lens through which all investment decisions are viewed and clarifies the return against the risk the organization is willing to take on any given investment decision. When drafting investment policy recommendations, define roles and responsibilities, investment manager hiring criteria, portfolio management assumptions, compliance violation processes, benchmark criteria, reporting requirements and policy review timelines. Combined, these foundational elements will serve as the framework to build and execute the investment policy.
necessary to make the infrastructure effective. 4. Standardize and Automate the Transparent Information Required across the Portfolio Ensure the organization has access to accurate, consistent and complete information to make educated, proactive decisions. Standardize the transparent information required across the entire portfolio. Select a vendor that independently verifies and confirms all cash movements and accounting entries. There are significant consequences for having noncomparative information. Daily verification and data scrubbing is critical for an accurate accounting of risk, performance and financial reporting. If transactional data is wrong, both accounting and risk data will be wrong. Fortunately with automated reporting tools, investors can swiftly and accurately gather, synthesize and act on market challenges. Organizations that move to automated reporting solutions can recoup costs in a relatively short period of time¹. To evaluate vendors, consider the following questions: • Can they consolidate, normalize and validate data from multiple sources? • Do their tools provide meaningful information? • Is their information accurate? • How easily can reports be shared across the enterprise or externally? Source: ¹ Association for Financial Professionals Survey, October 2008, Treasury Benchmark Survey
5. Continually Assess Risk to Improve Performance
3. Develop Your Investment Infrastructure With the investment policy defined, assemble a team of investment managers, custody, reporting and analytics experts who can implement and monitor the investment policy. Determine what kind of expertise is needed. Evaluate what measurable success they should have. Decide what investments should be managed internally or externally and the processes
Organizations need daily, transparent insight into their holdings to assess exposure to market events. Vendors that offer best practice tools can help monitor risk characteristics in a variety of formats that are easy to understand by stakeholders, including non-financial professionals. Best practice risk reporting solutions monitor portfolio risk concentration measurements,
®
Phone 800.250.7543 | www.clearwateranalytics.com/demo
including duration, sector, credit and issuer concentrations and reconcile accounting balance sheets against transaction detail provided by custody banks and investment managers.
8. Streamline Financial Reporting and Auditing
6. Monitor Compliance to Minimize Costly Violations The consequences of investing outside of investment guidelines can be significant to an investment portfolio. Choosing a compliance tool that is consistent, accurate and timely, with regard to notification of compliance violations, is critical to keep a portfolio in line with an investment policy. Because the nature of investment portfolios is dynamic, moving with market events and investor trades, daily compliance monitoring is vital. Successful compliance monitoring requires the creation of mathematical rules that mirror the investment guidelines. Starting with the organization’s investment policy, consider the following questions: What rules can be measured? What rules should your organization enforce? How should compliance violations be handled? Who should be notified of compliance violations? All of these questions are critical to developing and implementing a solid compliance process. 7. Regularly Measure Performance and Risk Against Benchmarks and Established Objectives Automated investment performance reporting is critical. Investors need to know what decisions enhanced the portfolio and what decisions detracted from the portfolio. By evaluating performance and risk against benchmarks on a regular basis, investors get meaningful information on relative performance and the decisions which created the outcome. Performance reports should be able to compare not only managers against their benchmark, but also managers against each other. Selecting appropriate benchmarks is vital. The value of benchmarking can be significantly improved with automation.
The consequences of inaccurate, incomplete or late financial information can be severe. Automating third party verification improves accuracy and timeliness. To safeguard against inaccurate reporting, consider using a provider that automates creation of SEC disclosures and that issues a SAS70 Type II audit report.
About Clearwater Analytics Launched in 2003, Clearwater Analytics reports on nearly $400 billion in assets for more than 2,000 institutional investors globally. The company’s industry-leading technology is the only platform on the market to offer a complete platform for dynamically monitoring global investments on a daily basis. To schedule a free demonstration of Clearwater Analytics technology and services, visit www.clearwateranalytics.com/demo, call 1.800.250.7543, or email [email protected]
®
Phone 800.250.7543 | www.clearwateranalytics.com/demo
