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Portfolio > Portfolio Construction

Portfolio Management System Is Advisors’ Most Critical Data Tool

By Richard W. Jackson, CIMA

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The portfolio management system is one of the most important daily tools of any operations staff in an asset management firm. It is through this system of technology and software applications that all data is produced and captured. Hopefully, you agree with us that the data produced by the various departments is your firm’s product. We call it “your resume.”

The portfolio management system must be adequate for all reporting and due diligence requirements. Our research has found that each professional portfolio team invests large amounts of resources in the form of time, money and technology to ensure that every data point is the best the team can produce. Accuracy is the goal in every aspect of the data creation, capture and distribution.

For any CIMA or other accredited research analyst work to be done, data first must be readily available. We analysts seek the most thorough and up-to-date data as possible. However, though we trust its reliability with regards to integrity, verifying the data is still time consuming. Raw data is produced by all business units of a portfolio management firm, and is reported in a variety of files and formats. All these data sets need to be stored and organized in a vault or data warehouse. We will be writing about data warehousing soon.

What to Look For

The portfolio management system is one of the areas our industry has seen some of the biggest technological changes and advancements. As the industry has continued its shift from a relationship-driven investor acquisition process to a more objective data-driven decision, the demand for data has continued to increase in volume. Our opinion is that these demands for more data will continue to increase, and the level of transparency is driving the efforts by all.

There are several key sets of data that a portfolio management system must be able to produce in user friendly reports:

  • Performance data
  • Holding data
  • AUM breakdown data

There was a time when one provider produced almost all the data. Thankfully, there are still many turnkey full service systems available. However, we are also seeing more managers determine that the more cost-effective method is breaking out the various data generation components. By breaking out the full service into individual components of the data capture and reporting process, the firm can find the applications best suited to their particular product structures.

Many managers prefer to work with a specific order management system along with a portfolio administrator and their custodian.

The most common issue every manager faces in adopting a new set of systems is time. Transitioning from one system to a better one takes approximately four to six months, and that may not even include the transfer of all historical data. The historical data may be something the firm’s staff must input or done by the support staff in the systems provider. Regardless of who does it, the historical data must be preserved and added to any new system. Managers work very hard to get the data stream built to a three- to five-year time period.

Security and accessibility controls for these systems have become necessary with all the concerns with cybersecurity and data integrity.

In our next article, we will discuss the newest service managers need for the asset manager and consultant. Data management and distribution – data warehousing – we call this the firm’s Data Vault. Each firm wants to bring online a system where contribution from many independent portfolio management teams and the corporate officers in the firm to create the firm and product’s full and comprehensive data sets.

The industry is reaching new frontiers in the data making and processing world, and the firms that provide important specialty services are new. These service providers are very open to addressing your unique needs. If they need to bring on new applications and reports to help you, they are, on many occasions, willing create the tools and devote the staff and expert resources to get the data streams your team needs and wants.

— Read Data Security Best Practices for Financial Advisors on ThinkAdvisor.

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