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Portfolio Manager Workflow: Unified Platforms

Technology and Tips

By FactSet Insight  |  April 8, 2019

As discussed in the first part of this series, the portfolio workflow is entering a new era of innovation following years on the sidelines. 

Technology has enabled portfolio managers to be better connected and informed compared with years ago. But what workflow advances does the future hold? One way to gain insight on the trends of tomorrow is to assess the hitches of today, on the premise that those are the areas that buy-side firms and their technology vendors are focusing on. 

According to Katie Crawford, Head of Investments Technology Product Management at $991 billion investment manager T. Rowe Price, for portfolio managers, “the biggest pain points include the mobile experience, access to quality data, mastering multiple systems, and understanding a holistic view of their workflow.”  

“Our goal is to provide tools based on workflow,” Crawford told Markets Media. “In addition to supporting separate applications for risk, quant factor analysis, research management, and myriad other sets of applications, we also want the PM to pull all of those applications together into one module-based experience.”   

Having siloed systems for different asset classes can be clunky, but the premise behind its emergence as the standard was sensible as the technology developed. “There was a belief in the niche product’s ability to achieve a better understanding for each asset class,” said Tracy Wolfe, Senior Vice President, Senior Director, Strategy at FactSet. “That desire has not gone away. What has gone away is the tolerance for having disparate systems complicate workflow.”

To obtain a more detailed view of the functionality and level of integration of existing portfolio management systems and to better understand portfolio managers’ expectations for the future, FactSet partnered with TABB Group to interview senior front office executives from a range of buy-side firms that employ a mix of proprietary and packaged solutions. 

Here are five insights we uncovered about the current state of portfolio management systems:

  • 65% of firms are challenged with tasks that require manual intervention, and manual trade entry is by far the biggest pain point for the front office workflow.
  • Decision and risk modeling are performed by a significant number of portfolio managers, and data inconsistencies resulting from accessing multiple systems is a major pain point for portfolio managers. In fact, TABB Group estimates that front office personnel spend an hour per day on average unraveling trade errors caused by inconsistent data.
  • 60% of asset managers say they have an unbridged gap between their portfolio management system and execution systems, and 47% of that gap is a result of portfolio management and execution data needed to be moved or uploaded in other systems.
  • 86% of firms are incorporating market data into their portfolio management platform, but almost half of small- and medium-sized asset managers do not have a view of real-time trader data.
  • The ideal portfolio management system was identified to be a seamless, single, front-to-back system that combines real-time market data with portfolio risk analytics and pre-trade compliance.

The expected benefits of having an integrated portfolio management system and workflow are clear. Not surprisingly, the biggest benefit obtained from an integrated workflow is having accurate and consistent data across platforms. Pre-trade compliance and guideline-checking are also important, as is having access to real-time analytics and intra-day risk exposures. In addition, firms are looking for extensibility into other asset classes and instrument types, with a major focus on cost reduction as they consolidate vendors.

“The middle and front offices are speaking the same language more, in the sense that they're managing the portfolios and analyzing the portfolios based on the same underlying data set,” said Stan Kwasniewski, Senior Vice President, Senior Director, Strategic Business Unit Operations at FactSet.

Another linchpin to the PM workflow of the future comes down to three letters: API. That is, Application Programming Interface, which is a set of subroutine definitions, communication protocols, and tools for building software. In layman’s terms, a good API makes it easier to develop a computer program by providing all the building blocks, which can then be put together by the programmer.

According to FactSet’s Wolfe, “To the question of ‘How will this all work?,’ I think the answer is that some of the business walls across vendors will need to come down, and we’ll have to leverage the modern technologies that we have today regarding APIs to really deliver what the asset management community is looking for.”

The future workflow will be built around APIs,” Kwasniewski said. “An investment manager will go out, find the best solutions they can in the marketplace, then use APIs to connect into those best-of-breed data sets or analytical engines.” 

This article was updated on April 8, 2019

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