The process of selecting a Performance Measurement and Attribution system is similar to the search for other types of investment management solutions such as Accounting or Trading platforms. Like all selection efforts, there is a need for organization, planning, and requirements definition, but the selection of a Performance system differs because of the dependency on, or interaction between, other platforms and the Performance system.
For example, if there is a requirement for Performance reporting that is based on investment strategy, then the account structure or the workflow for data enrichment must be considered in the evaluation. In some cases the information needed to calculate performance attribution is most accurately captured in the Order Management System (OMS). In other cases, the accounting system is providing the information needed to calculate performance attribution. Therefore, you need to consider how the Performance system will be integrated into your investment technology architecture.
Another consideration is the dependency on data. What security attributes are required for downstream Performance & Attribution reporting? You should consider how the Performance system interfaces with data providers and how the Performance system leverages data warehouse(s) or data repositories where the reference data may reside.
Due to the interaction a Performance system has with other applications, the selection of the Performance system should encompass a broad perspective on the overall effort, rather than solely on a Performance-centric view. The following are key areas of consideration for a Performance system selection process:
Organization and Planning
Define the areas in the organizations that may be impacted by the implementation of the system that is selected.
Identify the members of the selection team – For example, Operations, Technology, Portfolio Managers, client-facing Account executives.
Set milestone and target dates for the selection process – including RFI, RFP, Vendor demos and Contract negotiations.
Determine the need to leverage a 3rd party firm to facilitate the key areas of a selection (vendor short list, requirements database, selection / decision criteria, vendor scoring, vendor “true-up”, coordinate vendor demos, document workarounds, etc.
Gather both high-level and detailed requirements for this new system. Look at possible changes to your business in the next 12-48 months, and how this will impact the processes on this new system. Document and prioritize all the requirements. A comprehensive understanding of needs is essential to vetting and assessing which systems is best for your firm. Important considerations include:
Internal Investment Manager reporting requirements versus external Client reporting requirements
Workflow, reconciliation, and auditing requirements
Industry trends versus requirements unique to the firm
Compliance with Industry standards such as AIMR and GIPS
Interface requirements or best fit to current or future investment technology architecture including accounting, trading, and data management
Functionality related to Performance reporting, Performance methodology and calculations, and Attribution requirements
Metrics to Qualify and Score Performance Systems
Through this process, you’ll be bombarded with requirements, functionality, opinions, and vendor responses. In order to make sense of all this, there should be a structure where all requirements are itemized, prioritized, and weighted. Vendor responses should follow in the same way, and the end result should provide a scoring methodology that is transparent to everyone involved in the process and is weighted towards requirements that are more important to your firm.
Partner with Professionals “who have done it before”
Hopefully you’re not looking at replacing your Performance Measurement and Attribution system very often, so it’s a good idea to partner with a firm who has undertaken this effort with greater frequency, and who understands industry trends and the systems and solutions available. Firms who lead these selections should be able to leverage other Performance selection efforts (in terms of the planning, requirements and metrics) and then be able to customize and tailor a study to your specific needs. The firm should also have hands-on experience with the leading solutions in order to fully understand the product functionality and potential “workarounds” that a vendor may gloss over.
InvestTech is a leading investment operations and investment systems professional services firm focused on serving global asset management companies. We have assisted numerous investment firms to evaluate, select and implement performance measurement and attribution systems. We provide firms with expertise in front, middle, and back office applications and processes. Our structured vendor evaluation approach applies our hands-on implementation knowledge and experience with the leading products to ensure the best alignment between your firm's needs and vendor solutions. Please contact Christina Benoit at 781-545-6822 or firstname.lastname@example.org to learn more.