Given the dynamic of the investment management industry, accurate performance measurement and attribution remain fundamental to making informed decisions. However, relying on basic performance tools can impede progress as markets, strategies, and portfolios become more complex and varied. Today, many investment managers require advanced capabilities to gain deeper insights that can drive better performance.
Tools like simple benchmark comparisons and return-based attribution are useful for tracking overall performance but are limited in providing actionable insights. Basic methods fall short when analyzing the finer points of the sources behind outperformance or underperformance—whether sector allocation, individual securities, regional bets, or other parameters. Relying solely on basic performance measurement tools can lead to missed opportunities and overlooked risks. Without a deeper, more detailed analysis, portfolio managers may not fully understand what drives their returns, leading to suboptimal decision-making.
Advanced Performance Capabilities
Sophisticated performance measurement and attribution tools go beyond simple comparisons and allow for in-depth analysis of the factors that drive portfolio performance. Some key advanced capabilities include:
- Expansive Attribution Methods: With today’s multi-asset class investing, attribution needs to go beyond equities to encompass fixed income, multi-currency, multi-factor, and custom or user-defined methodologies that can handle varied approaches, including geometric and arithmetic, security and class-level, carve-outs, and cascading.
- Flexible Benchmark and Composites Management: As portfolios become more complex, managing benchmarks for the right fit becomes critical. Advanced capabilities can help in several ways, such as customizing benchmarks to exclude asset classes/sectors, fixing the weights of a class or sector, or inserting additional classes/sectors. Similarly, strong composite management is essential for firms seeking GIPS® compliance.
- Risk-Adjusted Metrics: Insights into risk-adjusted returns, such as the Sharpe or Treynor ratios, allow managers to evaluate whether returns are worth the risk taken.
- Configurable Performance Calculator: More flexible and expansive calculating power is required to calculate time-weighted rate of return (TWRR) and internal rate of return (IRR) across multiple currencies and asset classes, enabling analysis by region, rating, sector, or custom breakdowns for tailored insights that support strategic adjustments.
- After-tax Performance: To determine true investment earnings, tools that support after-tax ratios based on actual tax transactions, tax rates, or post-liquidation are necessary.
- Deeper Reporting: Standard outputs aren’t always able to deliver the depth or variety portfolio managers may need. More report options using different calculation models and data visualization with drill-down capabilities turn results into actionable business intelligence. In addition, data extracts and API capabilities can feed client reporting solutions or other applications.
With these and other advanced tools, investment managers can make better, more informed decisions with clarity, allowing for more precise rebalancing and strategic adjustments and a better understanding of risk.
A True Performance Book of Record
Tools beyond the basics are most effective in a performance measurement system that smoothly integrates with accounting, third-party, or proprietary solutions, with automated source data validation, configurable validation rules, automated calculated data validation, and exception management. Such an exceptions-based workflow delivers more timely, accurate results, with performance teams spending less time on operations – and more on analysis. A system that calculates and stores returns within it helps portfolio managers and performance teams get answers easier and faster, with greater depth and without rerunning calculations. Providing a full audit trail with annotations brings everything together to create a true performance book of record.
As investment strategies and market conditions become more complex, it’s clear that relying on basic performance measurement tools is no longer sufficient. To stay ahead in the competitive investment landscape, managers need advanced capabilities that offer deeper insights, better risk management, and a more precise understanding of what drives portfolio returns.
Purpose-built Analytics Solution
SS&C Sylvan is a complete performance measurement, reporting, and attribution solution that is purpose-built to deliver deep insights and actionable intelligence to improve strategic decisions and gain a competitive edge in the marketplace. Sylvan delivers timely, precise, and actionable insights with capabilities including fixed-income attribution, support for after-tax performance, data visualization, benchmark management, exception-based workflows, and more. Request a demo or contact us today to learn how Sylvan can help you take your investment performance analysis to the next level.
