Many investment managers today are using non-traditional strategies and investing in complex asset classes to improve returns and diversify risk, yet many lack the measurement capabilities and analytical tools to reflect their investment decisions.

The nuances of fixed income investing, for example, dictate that fixed income managers use different tools from those used in equity investing when it comes to measuring attribution. Many investment firms are still determining the most effective way to achieve this.

Operations and middle office teams at wealth management firms have less resources at their disposal, more demands for transparency than ever before and more complex instruments and strategies to decompose. Often desired functionality - like daily performance calculation or on-demand report generation by end-users - are not achievable as the result of system or resource limitations.

The benefit of today versus five or ten years ago, however, is that more solutions and methodologies are available. The challenge? Finding a solution that matches the investment process, that can support current and future portfolio mandates, keep pace with the number of new complex instruments being introduced to the market, support high volume demands across thousands of portfolios, and also meet internal and external reporting demands.

When firms begin assessing the implications of introducing new technology, like a solution for  performance attribution, it's imperative to assess the various audiences who will receive the reports. Often this is the most difficult part of the process as each of these audiences need a customized deliverable that they can take action on - and it's not always the same. For instance:

Performance operations

Performance teams are in the weeds day in and day out constantly churning calculations to verify daily returns net exposure, and how to best present information in line with regulatory requirements while still aiding their portfolio managers and marketing teams with the information they need to instill client confidence and drive returns. When performance teams look at an attribution system, they want to see that it can be easily integrated into their daily work flow, can scale with increased transaction volume and ensure make sure it has a wide range of analytics to model the investment processes.

Portfolio managers

Portfolio managers are constantly seeking ways to increase alpha. What was their latest return? Did it beat the benchmark in use for the mandate? Will their client be happy? Portfolio managers expect granular detail that lends insight into how their decisions impacted the investment portfolio performance and the ability tell a story of where their returns came from. They want a platform that provides insight and analysis that will feed their next investment decision in as short a time frame possible.

External clients

Some investors today are increasingly interested in transparent reporting that illustrates where their portfolios did well and where they fell flat. Others are content with a high-level report that lets them know where they are in relation to their goals and industry benchmarks. Having a flexible measurement system that allows for customized reports enables firms to meet all client expectations - no matter how detailed their requests are.

As firms continue to expand non-traditional investing strategies, technology must keep pace ensuring that the firm has the right tools to monitor and measure return and risk exposure. Fixed income investing is just one example of an area that requires tools with improved flexibility.

With evolving regulation and changing client needs, rigid one-size-fits-all systems may solve the business needs now but may not five years from now. It is essential for investment teams to develop and implement a forward-looking yet pragmatic approach to the technology solutions that they evaluate, keeping in mind the unique needs of the audience and the business while also realistically assessing the challenges of the design, build and implementation. Flexibility is a key determinant of future success.