Introduction

When examining the nuances of institutional reporting, the key is to ‘know your consumer’. What reporting data should asset managers expose to institutional investors and what data should they control? The ultimate objective for reporting system vendors is supporting asset managers in effectively servicing their clients, asserts Abbey Shasore, CEO, Factbook.

Understanding Exposure Requirements

‘What data do I need to expose and what data am I being asked for’ represents a crucial consideration for asset managers reporting to institutional investors. These questions may appear identical but are fundamentally different.

The exposure level required by an institutional investor differs significantly from that of a private investor. Consider a pension fund with a substantial mandate approaching an asset manager known for strength in emerging market debt. The same pension fund might approach another asset manager for North American large caps based on specific expertise.

The information the asset owner wishes to track will vary considerably between large caps (primarily equity-based) and emerging market debt (mostly fixed income and debt derivative products). This basic comparison reveals immediate differences in exposure requirements.

Asset owners typically request reporting information they can analyse and interrogate, or information that provides assurance that the asset manager’s strategies are succeeding. This performance data is generally monitored quarterly, with asset managers occasionally being asked if improved indicators are available.

The Vendor Perspective

From a vendor’s viewpoint, asset managers rarely seek guidance on what data to expose to asset owners. Instead, they want assurance that when data requirements or sources and providers of that data change, vendors can accommodate these amendments. The data may require different calculations or filtering, and asset managers need confidence that vendors can deliver this information within specific timeframes.

This pressure peaks when asset managers secure new mandates. They must be exceptionally responsive when learning what asset owners expect to see in monthly or quarterly reports. Asset managers need confidence in their access to required data through in-house or external vendor reporting systems and that their operations teams possess the necessary capacity. Asset owners want careful control over the supplied information, specific datapoints, and presentation methods – they won’t accept generic reports as interim solutions.

Data Control Considerations

An obvious data control consideration for asset managers is benchmark selection. While asset owners retain final veto power, asset managers typically make recommendations on sector averages.

Another scenario involves investment managers handling multiple funds for third parties. Asset owners might request total exposure for particular asset classes, such as US equities or Canadian steel. Locating this data under certain conditions may not be straightforward, creating challenges for vendors in generating solutions.

Vendors might also support clients with data exposure when dealing with investment management firms having multiple subsidiaries or affiliates that maintain strong individual brands and operate independently.

While some client reports might be produced centrally, finding a universal report format satisfying all subsidiaries’ requirements may initially seem impossible. Vendors must demonstrate flexibility and technology capabilities allowing each affiliate or partner to represent their individual perspective.

Meeting Evolving Demands

The investment management world is populated by assertive professionals – asset owners rightfully make demands of their asset managers and won’t request reporting data merely out of tradition.

Asset managers frequently discuss with vendors the process of implementing report changes – would they depend on the vendor, or would they handle modifications themselves? They may require identical data but viewed through different lenses.

Conclusion

In support of asset managers and their responsibility for data exposure to institutional clients, reporting vendors face three primary challenges: determining data origin, understanding its presentation at the point of contact, and demonstrating technological capability to meet requirements swiftly. This means representing data according to asset owner specifications.

Vendors must show that despite challenges related to different data types in consumption and representation within institutional reports, they can effectively address these challenges when viewing data from various perspectives. The ability to rapidly adapt to changing requirements and present information through different lenses is what distinguishes truly effective reporting solutions in today’s institutional investment landscape.

By Abbey Shasore, CEO, Factbook

@FactbookCompany