Linkedin Twitter

Client Reporting Now Critical to Investment Operations

February 17, 2013

Author: Patrick Murray
Title: President and CEO

One of the critical aspects of providing services to investment management firms, whether for an established operation or a new private fund, concerns the delivery of accurate, timely, and audit quality reports and statements. Prior to the financial crisis in 2008, client reporting did not have the critical level of importance now placed on the function.

This aspect of an asset manager’s responsibility has evolved into one of the two or three single most important parts of the relationship between an investment management firm and its clients. Today, investors seek timely, frequent, adequate and transparent disclosure to evaluate and monitor the material risk of investments in various account and fund vehicles.

Purpose of Client Reporting

Client reporting presents the medium by which advisors communicate their value as a fund or separately managed account (SMA) manager. Reports should contain qualitative and quantitative information of what occurred in the fund or portfolio over a certain time period (monthly, quarterly, annually).

High-quality and well-organized reports help investors gain insight into:

    • Investment Strategy
    • Alignment with Investment Mandates and Strategies
    • Top Positions
    • Sector and Investment Type Allocation, and
    • Investment Performance versus one or more Benchmarks
      • Performance Attribution
        • Security Selection
        • Sector Allocation
      • GIPS Compliance

Clients should also have the ability to determine from the information that performance variations do not lead to actions inconsistent with the investment strategy.

Client Reporting Solutions

When conducting due diligence, investors look for descriptions of accurate and timely reporting to determine their level of confidence in the investment or fund manager. Increasingly, more firms customize and personalize reports based on clients’ preference and delivery channels. With the trend of customization and personalization, the cost to produce client reporting has increased, which improves the case for investment operations outsourcing or an a la carte service like client reporting outsourcing.

The traditional monthly or quarterly mailed reports have given way to detailed analysis and client reviews. These reports show performance, investment strategy, products and services, and market commentary.

Clients appreciate it when advisors take into consideration their reporting preference and provide meaningful visual information, which includes the following items:

    • Time Period of Performance
    • Top Holdings
    • Transaction Activities
    • Sector and Investment Type Details
    • Tables, Charts, and Graphs
    • Commentary
    • Electronic Format (e.g. PDF, XLS, CSV)

Reports can range from monthly valuation consisting of portfolio valuations, asset allocation security and sector analysis, transaction summary and detail, cost roll forward and accrued income. Full blown portfolio reviews may include detailed asset valuation, performance attribution analysis, market review and index returns, investment policy and market outlook and commentary

Technology and Reporting

It’s critical to have in place a reporting platform that meets periodic and ad hoc reporting requirements. State of the art reporting application or investment operations outsourcing services enhances proactive client service strategies.

The most effective applications or reporting outsourcing services provide a one-stop automated client reporting solution that can extract data from multiple databases and files while formatting, personalizing, and branding the report.

The software or reporting service should have the capability to produce reports in the most common file formats-- Word, PowerPoint, Excel and CSV, PDF, HTML and XML. For users, who love formatted Excel reports to run further analysis, at STP, we leverage multiple Excel .NET API libraries that allow us to completely configure and format a spreadsheet--even produce dynamic pivot tables.

Here are some of the advantages of automated reporting:

  • Reduce Reporting Errors
  • Promote Consistencies
  • Improve Branding, Look, and Feel of the Report
  • Respond to Client Requests for Transparency and Robust Data
  • Tailor Data Inquiries in the Report
  • Relationship Reporting for Multiple Accounts

Automated reporting can free up investment and fund advisors and staff to dedicate more resources to core functions like investment management, sales, marketing and client services.

Summary

In today's marketplace, asset management firms need to have a client reporting function that makes it easy to create accurate, timely and efficient reports. The bottom line here is that clients want high-quality reports that contain understandable and reliable data about their investments.