Investment Data Health Check

By: John Turney, Global Head of Total Portfolio Solutions

2024 is here and like every new year it begins with resolutions of all kinds. Many resolutions are focused on health and well-being, and why not? What’s more important? My yoga class in early January was packed. The same happened last January and I think an early arrival to fitness classes will be required until after spring break, as resolutions fade and the crowds thin out. 

As I was reflecting on this the other day, I started thinking about how health and wellness concepts also apply to the Front Office Solutions business at Northern Trust. My wife, a professional health coach (she is busy this month!), often makes the point that so much effort in healthcare is put into treating symptoms and not the root cause. Forgive the stretched analogy, but I believe some preventative care could go a long way towards improving the quality of investment and portfolio data for asset allocators.

Allocators spend considerable time and resources aggregating qualitative and quantitative investment data and designing complicated workflows that act to band-aid the problem instead of diagnosing what ails their operating models. Challenged by disparate data sources, inconsistent reporting formats, and lack of timely data, it has been difficult for allocators to gain an accurate and holistic view of their portfolios. While allocators want to move on from legacy systems, there are often in-house barriers to doing so which has resulted in 70% of enterprise digital transformations failing.[1] Vendor relationships, data exchanges and interfaces have proliferated at an astounding rate. Yet, many only provide a partial or lagged view of portfolio activity. Furthermore, disparate systems and data sets require extensive and time-consuming reconciliations, and many allocators are left questioning accuracy and consistency across platforms.

Allocators, understandably, desire to get and do more with their investment and portfolio data than existing industry tools and service models can support. More than half (55%) of asset owners still use spreadsheets to monitor their asset allocation, creating risk and opportunity cost for investment teams.[2] As alternatives have grown as a percentage of asset owner allocation, this has accelerated the need for flexible systems that can quickly process and aggregate investment data into a consolidated view.

Going back to my analogy, we have built a solution in Front Office Solutions akin to a preventative care approach. We offer a secure, cloud-based investment lifecycle software platform complemented by middle office services. This combination enables allocators to view and analyze portfolio and investment information across all asset classes in a unified framework so they can reallocate internal resources to higher value functions.

Our process is designed to assemble a unified, granular data set by servicing our clients’ assets. This is key – instead of attempting to combine disparate data sources, we go to the source to create the best-available view across public and private assets. In our model, the servicing of the assets and the assembly of analytics-ready data is an integrated process.

Once the necessary operational data is assembled, we can then overlay advanced analytics and investment reporting, so clients can understand the total health of their portfolio. We provide a unified framework to track existing investments in a portfolio, regardless of where they are held, and view the impact across the total portfolio. For example, the entry of a capital call in our system can generate a cash movement, while instantly updating performance, exposure, liquidity and accounting.

We also help clients research new investment opportunities and analyze the potential impact of those changes. We provide a robust document management system and CRM capabilities to track interactions with investment managers and the ability to view how a new investment would impact their current portfolio. Finally, we provide a comprehensive alert system for clients to define their workflow and stay on course with their policy objectives. Our alert system helps clients monitor their existing investments and potential new investments so they can take proactive measures against any changes.

As I think about my own wellness goals, I realize how important it is to have real-time access to fitness and health data to help keep me on track. Similarly, it is important for allocators to have timely and accurate investment and portfolio data consolidated and accessible to be able to achieve their goals. Front Office Solutions solves for the challenges facing allocators with complex, multi-asset class portfolios by incorporating accounting, performance and risk measurement, risk exposure analysis, liquidity tracking and forecasting, portfolio planning, and research management into a single system.

With Front Office Solutions’ software and service offering, clients can pivot from a quick fix, bandaged operating model to one that is focused on preventative care to monitor investments and portfolios, before a problem arises.

[1] Patrick Forth, Tom Reichert, Romain de Laubier, and Saibal Chakraborty, “Flipping the Odds of Digital Transformation Success,” BCG Digital Transformation Report, October 29, 2020, https://www.bcg.com/publications/2020/increasing-odds-of-success-in-digital-transformation

[2] Editorial Staff, “More Asset Owners Rely on Spreadsheets for Asset Allocation,” Traders Magazine, November 8, 2023,  https://www.tradersmagazine.com/news/growing-number-of-asset-owners-rely-on-spreadsheets-for-asset-allocation/