Buy-side Awards 2016
Gather any group of performance measurement and attribution professionals together, and talk will soon turn to the trials of data management. Dealing with data input errors, using manual workarounds when the system produces suspect or abnormal returns and having to re-run measurement calculations all consume time that managers would prefer to devote to the analysis of performance.
London-based StatPro had heard enough of these conversations to make efficient data management a priority when it sat down to design a new performance measurement system from scratch in 2012.
It also knew firms tend to have their own ways of running performance management processes, so it created a flexible framework where users could configure the workflow to suit their way of operating. Automation was a critical element – applied not only to the checking of input data, validation of calculations and flagging of errors and anomalies, but, where possible, to the resolution of issues as well.
"We worked with clients to understand their daily performance management processes, from getting data out of their accounting systems, all the way through to analysing attribution and risk," says Neil Smyth, StatPro's global marketing and technology director.
"We realised data must be automated and, where returns are flagged as not quite right or even abnormal, the system needed to be intelligent and flexible enough to flag the issue and then resolve it via an exceptions-based process. This can help eliminate abnormal returns that can be difficult to explain to fund managers and clients. Having this level of automation and intelligence within the performance system allows analysts to work on value-added tasks versus data management issues."
Building from scratch
The architecture of traditional performance measurement systems imposed limitations not only on the time taken to process portfolios, but also on the volumes that could be handled. "One of the advantages of building a system from scratch is we could use the latest technology," says Smyth. StatPro built its Revolution Performance platform entirely using the cloud technology of Amazon Web Services (AWS).
"Firms told us about the pressure on their overnight calculation window, and how if something went wrong they could end up a day behind because it could take eight hours to recalculate their portfolios, with knock-on effects on longer-term processes," says Smyth.
The 'elastic' nature of the cloud computing offered by AWS allows processing resources to be scaled up on demand. "With Revolution Performance, it is the user, not the system, that decides how long the processing will take. If a firm needs their portfolio measurement figures in an hour, we can configure the cloud to calculate their dataset in an hour," he says.
StatPro says it recently calculated performance measures for 102,000 institutional portfolios, with 600 million lines of holdings and 60 million transactions in less than 30 minutes. "This transforms performance measurement from an overnight process to intraday, if a firm should require it," says Smyth.
The Revolution platform also incorporates StatPro's attribution and risk analytics. The latter has been bolstered by StatPro's recent acquisition of New York-based Investor Analytics, a provider of cloud-based portfolio analysis tools. The availability of performance, attribution and risk analytics on an integrated platform addresses another industry bugbear.
We realised data must be automated and, where returns are flagged as not quite right or even abnormal, the system needed to be intelligent and flexible enough to flag the issue and then resolve it via an exceptions-based process. This can help eliminate abnormal returns that can be difficult to explain to fund managers and clients
Neil Smyth, StatPro
"Clients tell us they are tired of managing multiple systems for their performance measurement and analysis because of the problems of linking systems with their individual data silos, and the issues that arise when different systems use different models," says Smyth.
With Revolution, once performance data has been calculated, it is immediately available to the attribution and risk analytics, as well as asset allocation and compliance, all on the same platform.
StatPro also introduced a different business model with Revolution. Instead of the conventional licence fee based on the number of users or sites, StatPro charges per portfolio and cost also depends on the level of analytics applied to a portfolio.
The zero cost impact of having many users encourages collaboration at client firms, says Smyth: "Teams in the front office can use it and so can the middle office. Some clients allow sales and marketing to look at certain output analysis, and there are some firms who even allow their clients to log in and view interactive attribution analysis, rather than just sending them a static PDF report once a month." The platform provides robust controls for authorising users and determining exactly what each is able to view.
One client's head of investment services says the firm selected the platform for two primary reasons: "Firstly, it had the best user experience, in terms of its intuitive design and interactive charting. Secondly, the cloud-based solution and system performance were very attractive for our business to reduce costs and improve operating efficiency."
Scalable processing allows the institution to run large numbers of portfolios and obtain results in minutes, the investment services head adds: "The system also has advanced controls for data that enable our team to perform quality assurance in an effective and efficient manner."
The week on Risk.net, December 2–8, 2017Receive this by email