How does an investment management firm decide on the technology to use?

Choices create opportunity

A portfolio manager with just a few positions and infrequent modifications may be satisfied with Excel and a fund administrator's reporting. That may work for a fund with $25-$100 million assets under management, maybe. A representative portfolio may have 10 price-weighted holdings.

Funds with less than $1 Billion are likely in need of a portfolio management system that can be used by portfolio managers for strategy reporting and portfolio operations. Portfolio operations include regularly used functions such as position adjustment and portfolio rebalancing. Those operations facilitate shadow accounting to maintain portfolio objectives. There's likely more asset diversification with an increase in capital as risk measures are put in place.

More than $1 Billion assets under management (AUM) and it becomes a fiduciary responsibility to use best practices in managing the finances of investors' capital. That means the portfolio managers and investors are looking for a system that has functionality available at each stage of the workflow to facilitate tactical and if possible, strategic operations.

Operations include:

What are the significant parts of the workflow and where is there potential for a breakdown in the process? The results of this questioning will create a list of features to filter vendor software offerings.

By considering these factors, a portfolio manager can select a system that best meets their specific needs and requirements.



Decisions are often difficult