Client Reporting Insights
Client reporting: can overexposure blur your vision?


Abbey Shasore, CEO, Factbook, discusses how buy-side firms must balance the regulatory and client demands for transparency with the risk of data overkill.

The drive toward openness within the investment management industry has been gathering pace for many years now, but certainly went through the gears since the crash of 2008. Investors and regulators alike have viewed the need for information sharing and clarity as priorities since the opaque investment structures of the subprime world came out of the shadows. Compliance with Solvency II, MiFID II and a raft of other legislation has sought to reveal potentially damaging secrets concerned with capital adequacy, fees and other issues. Terms like ‘look-through’ and ‘transparency’ have become de rigueur.

In the area of investment reporting from buy-side firms to their clients, however, has this trend resulted in a ‘mud-on-the-wall’ approach? Some would say that there is a temptation for some buy-side firms to deluge their investors with so much data that it will somehow convince them that the money manager must be ‘on top of things’ and ‘not hiding anything’. Investors are sometimes sent so much information that they can’t possibly go through it all to pick out the most pertinent data. My question is, has the crusade for transparency gone too far?

It could be argued that client reporting should be more selective. When the markets are forging ahead, there is a case for sending investors less information. Conversely, it is when the markets begin to tank that investors want to be a lot more forensic with their performance data, therefore extra detail could be provided at such times.

Buy-side firms should perhaps be shaping and moulding their reports according to market conditions. If absolutely nothing has changed in an investor’s portfolio from one month to the next, is it really worthwhile sending the same, detailed monthly report again? Wouldn’t it be more valuable, when there has been, for example, some kind of geopolitical shockwave, to issue a more detailed report within 48 hours? Or at the very least mid-month?

Perhaps there is a point where the need to be comprehensive actually becomes detrimental or even self-defeating for the investor. The purpose of any client report should be to provide the investor with information that they can (or should) act upon, without having to wade through the ‘so what data’. Anecdotally, over the years at industry events I have heard several asset owners say that ‘if another fund manager turns up at my office at quarter-end with a 300-page report, I’ll shoot them.’ The cry is: ’why are you bringing me information on the items you want to tell me, rather than what I want to know’. It’s a fair complaint.

Whilst at present I don’t observe many buy-side firms exposing their business intelligence tools to their clients, or enabling investors to select which components they find most valuable, in the future buy-side firms must increasingly concentrate on how they can connect to their customers and become more outward-looking. The obstacle they face is not necessarily including different information, metrics, or charts on a report; the challenge is moving from a static experience to a fluid conversation. Buy-side firms need to look at the delivery of critical information, the analytics around that information and how to accommodate the needs of the investor. In many instances, this will mean shifting the communication process to an on-demand model.

One such solution is to provide investors with some kind of portal, with which they can retrieve the information that they wish to see. This kind of self-service model is fine in theory, but nevertheless it places the onus on the investor to locate the correct data. Moreover, if every buy-side firm has their own unique portal for the investor to access, how many hours will be spent searching on very different portals for the same information (not to mention all the logins and passwords to recall)? Is this only creating more work for the client reporting team?

I believe that there is a point of diminishing returns beyond which the provision of extra client reporting data is neither desirable nor viable. The emphasis needs to be on knowing your information consumer: what data do I need to expose to my investor and what data do I need to control. I see buy-side firms becoming more selective about the data that they provide to investors in the future, with the volume of data becoming less important than the relevancy or expediency of the information.

Controlling the lens will keep the investor’s picture firmly in focus.

Abbey Shasore, CEO, Factbook


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