Empowering the end user through dashboard visualisation for investment analytics
A pioneer in the field of data visualisation, Edward Tufte encourages the use of data-rich illustrations with all the available data presented. When examined closely, every data point has value; when seen overall, trends and patterns can be observed. In short, his theory is to let the data speak for itself.
This principle is very appropriate for meeting the needs of the investment management industry today. Buy-side firms have, over the years, developed sophisticated means of managing assets, liabilities and risk. However, their ability to visualise the data in an aggregated and risk-attributed fashion has somewhat lagged. Driven by demand from investors, regulators and senior management, today’s investment professionals increasingly need insight into data with a significant amount of attribution, correlation analysis and look-through capabilities. Modern visualisation techniques have evolved around domain-specific and role-based user interfaces, or ‘dashboards’, that model complex data aggregated from disparate systems. These dashboards enable look-through for aggregated and fine-grained attribution, the monitoring of key performance metrics and decision support.
Due to these internal and external compliance drivers, the ability to have a consolidated view of data from disparate systems and drill into these numbers is very powerful and increasingly a necessity. In the U.S., reporting requirements have already begun to scale up with the implementation of Dodd-Frank and will be extended in 2012.
Providing Greater Transparency – Compliance and Regulatory Reporting
It is challenging to visualise acquired and aggregated data in an open and measurable fashion. As a result, it can be a costly task to provide timely and accurate reports. This need has been the key driver for a number of recent regulatory measures, some of which are already required in the sell-side world.
In the U.S., this has already started with the new Form PF. This SEC regulation requires a variety of portfolio information which mainly focuses on risk. A critical issue to take into consideration is that most of the information needed to complete the form is located in disparate systems. In order to comply with the complex and thorough guidelines found in these reports, financial institutions need to look to solutions with a robust data acquisition process. Once the solution is implemented, business users will become more efficient by adding visualisation and dashboarding capability into the investment management lifecycle.
One clear conclusion to draw is that financial institutions will benefit from the ability to develop highly role and context-sensitive dashboards. By providing these flexible visualisation tools to the end user firms will be able to enhance the investment management process with deep analytics for measurement, and risk and performance management. The challenge is to translate the specific requirements to the needs of a global asset manager, private wealth manager, or pension fund manager.
Global asset managers
In large Global Asset Management firms, there is typically an ‘open Swiss Army knife’ answer for every problem: all of the tools may exist, but you could be wounded finding the right answer. A prudent data acquisition strategy allows for a greater return on the investment in existing applications by allowing for a higher quality of information to be published to the business user, via the dashboard.
This is certainly exhibited in the growing trend to concentrate on core competencies by outsourcing such functions as infrastructure and application maintenance.
Private wealth managers – Private Fund Managers
In wealth management, a critical function is the comparison of fund performance against a set of benchmarks. Fund data often needs to be aggregated from multiple sources and standardised in a manner that enables consistent benchmarking. There is also a need to compute risk, P&L and performance across multi-asset portfolios. Envisioning this information in an intuitive fashion is essential for portfolio managers. Highly tailored dashboards can significantly aid the productivity of portfolio managers and private wealth advisers by putting the information they need the most at their very fingertips.
Private fund managers have to comply with internal directives and external regulations, such as Form PF. This new SEC directive requires fund managers with AUM of more than USD1.5 billion in the U.S. to file a statement electronically every quarter. This involves combining and aggregating information that lies in various systems within one institution. The devil lies in the details, such as value at risk (VAR), collateralisation and types of asset classes, all of which currently often reside in different systems, making electronic reporting a rather complex process.
Pension fund managers
For pension fund managers, a key area of focus is the need for greater transparency in compliance and regulatory reporting. The public sector is regulated by a vast array of state and federal laws making pre and post trade compliance a must, especially when it is time to calculate the analytics and it comes to events such as tolerance and counterparty risk breaks. Pension fund managers also tend to operate within very conservative risk limits and require significant broader attribution of asset performance and risk.
Flexibility is key
Buy-side participants have two options when it comes to implementing their user experience platform - hosted and in-house. A hosted solution provides a number of advantages to business users. It enables them to maintain focus on what the experience needs to be at any point in time without involving IT when change is required. Nevertheless, one cannot overlook the in-house option. Some institutions have already invested in a number of applications internally and regard this resource as a key factor for the ongoing success of the organisation.
The level of ease with how the business feeds information into its core reporting mechanism is therefore critical. Once the data has been aggregated, it is then about having the ability to tailor the report to the needs of the business user without a lot of technical intervention.
Regardless of whether the platform is hosted or installed in-house, buy-side participants need to have the ability to visualise and report on information based on internal and external requirements, and regulation. Dashboards need to be highly flexible based upon role and function, enabling delivery via internal portals, secure external applications, and possibly as installed software.
The bottom line: driving profitability and enhancing client relationships
We can conclude that there is a strong business case for maintaining the strength and capabilities of investments made in existing analytics systems. However, the need to supplement these with a platform capable of acquiring data from disparate systems that will bring them a greater amount of transparency and flexibility in reporting is now required. Ultimately, all investment firms want to offer the best possible service to their clients. Having the ability to receive information in a bespoke manner that suits market participants and serves their clients better will enhance those relationships and, ultimately, help drive profitability.
Rick McCarthy
Managing Director, Americas
rick.mccarthy@dstglobalsolutions.com
Learn more about how Anova, our investment analytics solution, can assist with these challenges.
