The market turbulence we are all experiencing as a result of the COVID-19 pandemic has thrust the need for efficient online technology to the forefront of business conversations. Within the world of finance, this is especially true for the middle office, often considered the engine house of productivity for firms. In addition to the regular work that performance, risk and reporting teams must continue to deliver to support the normal operations of their firms, ad hoc requests are skyrocketing as the front office grapples with the implications of the latest market movements and news stories from their homes. For the middle office to keep up with this extra workload, they need to maximize productivity.
Gleaned from more than 40 years of experience serving the middle office, through business-as-usual times and major market-moving events, FactSet offers the following five lessons to firms seeking to build efficiency and scale, manage additional workloads, and support decision-making across the portfolio lifecycle.
1. Outsourcing Data Management
When markets are volatile, the feedback loop between the performance team and the front office is even more important. Active portfolio managers will expect to see performance and attribution results every day rather than just at month-end, to ensure they understand the impact of the latest market movement. However, it’s unusual for a performance team to reconcile portfolio data daily. Increasing the frequency with which data is checked and cleansed can add a significant burden for teams whose manpower and time are already limited.
One way firms can offload this burden is through outsourcing their data monitoring, reconciliation, and management processes using a combination of automated technology and in-person verification. Performance teams can rely on off-site operators to track data workflows 24 hours a day and provide pre- and post-calculation data checks. The outcome is that errors and omissions can be identified overnight so that at the start of each day, performance managers can be confident that their analysis is reliable and actionable.
2. Dashboard Views
Market volatility inherently poses a challenge for asset managers who must keep up to date with the implications on every portfolio they manage. Larger firms must proactively monitor hundreds or potentially even thousands of funds. Smaller firms might not be keeping tabs on the same volume of funds but will still want to know when milestones like performance thresholds and VaR limits are breached. Staying on top of this information in real time can consume a huge amount of manpower and resources.
Dashboard views are a great monitoring tool to easily aggregate the performance and risk of all funds and display results in one consolidated place. Having the ability to highlight or alert performance teams to errors or big changes is always a must but is especially useful in times of market instability.
3. Access Anytime, Anywhere
During the current COVID-19 pandemic, firms around the world are having to adapt to working remotely at a breakneck pace. For the middle office, this can mean figuring out how to meet deadlines and deliverables without access to the usual systems, software, or even potentially hardware. If your analytical tools are sitting idle because infrastructure is centralized, the middle office will struggle to support the investment process through the present turbulence.
The ability to securely log into your suite of tools and access a full breadth of data from anywhere via the web is key. This need for flexibility is perhaps the biggest lesson for many financial institutions going forward.
4. Self-Service
The solutions that I’ve mentioned so far assume that the additional workload in times of crisis will be shouldered by the performance team. An alternative tactic is to empower those making ad hoc requests (such as portfolio managers on the front lines) to answer questions for themselves; several tools can facilitate this approach.
Many of our clients use automation tools to generate analysis daily, which can then be stored in a central repository to be accessed by the front office, client services, marketing, sales, and anyone else who needs the information. Automation tools can schedule the generation of reports that mimic the manual process of exporting portfolio analyses to Microsoft Excel, including daily performance, attribution, risk, characteristics, and exposures. The downside is that there is no interactivity for the end user and the performance team will need to preempt everything that they might need. If something unforeseen comes up, the performance team will need to step in and fill the gap.
Another option for automation is to generate collated and formatted PDFs and PowerPoint reports that are accessible to the end user. The performance team can schedule the application, but the ability for end users to personally access the reports as needed offers some level of interactivity as they can generate the output on demand.
Before the need for en masse work-from-home, we saw that there is a demand on performance teams to offer a fully interactive approach to their stakeholders—an option to allow end users to manipulate results that have been reported and archived, creating their reports and charts in custom layouts. The performance team can control access, limiting a user to either viewing preliminary results or only data that has been checked and signed off. With this approach, anyone outside of the performance team can answer their ad hoc requests without generating work for their performance colleagues.
5. Customer Support Lines
When fielding an increased workload of ad hoc requests, any delay in response can hamper the front office’s ability to react to market movements. In times of market turbulence, collaboration is key and the importance of 24/7 support is highlighted.
At FactSet, we know this all too well, as our client service is unmatched in the industry. Our experience shows that round-the-clock access to a team of global product specialists who can answer questions on-demand, via phone, email, or instant message is critical. Perhaps most importantly, questions are answered by experts with in-depth application knowledge, as opposed to less specialized frontline support.
As working remotely with reduced resources and increased distraction becomes the norm, firms that can scale and adapt will have the advantage. These lessons may even be a roadmap to a new normal of flexible working, as the industry pivots and invests in the technological infrastructure to allow employees to work from home as an ongoing option.
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