Research from CEB TowerGroup cites that almost half, 45%, of asset managers say they will adapt or replace their performance measurement system by 2018. The same research cited that 4 out of 10 performance measurement systems leveraged by buy-side institutions date back to 2006 or earlier.
These powerful statistics indicate that many asset managers have been using fragmented performance measurement technology or processes for a number of years. System entrenchment can contribute to a number of operational risks including: loss of efficiency from business users, inconsistency, degradation of data integrity and, most importantly, an inability to provide true exposure calculations from underlying holdings. This is because many older specialty systems lack enterprise data integration, advanced look through and data visualization functionality that enable operational cohesion and support better investment decision making. Given the dramatic changes to the global investment landscape; the rise in new, complicated investment vehicles that offer greater potential for yield; the growth in diversification strategies and the numerous technology improvements in the market, it is perhaps not surprising that buy side institutions should be primed to modernize their performance measurement structures.
Replacing or upgrading a performance measurement system comes with a litany of legitimate concerns including integration, scale and cost. These concerns, however, can be put into the context of the overall business risks associated with not considering advanced performance measurement and attribution functionality. Internal and external demands for transparency have compounded the pressure placed on the middle office for better information faster. New performance and attribution technology can offer a holistic view of data, decompose the sources of risk and return from any asset class and enable data to be analyzed with robust dashboard visualization features. Innovative, new technology features like those mentioned can provide a sustainable competitive advantage especially as firms seek strategies to expand their global footprint. To download the full CEB TowerGroup Research Report click here.