The added value of investment analysis — especially in times of market volatility

Wednesday, May 27, 2020 | By Ian Searle, Head of Performance & Attribution EMEA

The added value of investment analysis — especially in times of market volatility

Investment performance teams require a comprehensive and highly customizable performance and attribution solution to provide informed analysis to their investment managers. Right now, investment analysts are poring over recent market activity and comparing the results to ex-ante (forecast) risk models employed to predict likely outcomes during extreme events. To conduct this analysis, accurate, detailed and meaningful ex-post (actual) performance and risk results are critical.

Much like the current market situation, the financial crisis of 2007–2008 taught us many things. It was a timely reminder that we cannot prepare for every eventuality, that we understand probability and uncertainty a lot less than we think we do, and that extreme events rarely produce results that match predictions.  Over the past decade, investment and financial firms have worked to refine and improve risk models and our understanding of what they tell us. Comparing actual outcomes to predicted ones can be a valuable tool in this analysis.

To do this, analysts need the right systems with the robustness and flexibility to handle both large volumes of data and the customization of calculations that can offer deep insights. In the early part of the last decade, the approach to new methods of performance attribution analysis and the subsequent model augmentation required led SS&C to adopt a flexible and more efficient framework to meet the changes. Since 2013, SS&C Sylvan has offered a proprietary User-Defined Attribution (UDA) capability that provides a unique, customizable and flexible ability to innovate new attribution models and implement these quickly and efficiently. Early adoption focused on new fixed-income attribution approaches, but our UDA capability now supports many models, including Key Rate Duration, Tim Lorde, Campisi, Gillet and Homolle, and several more. Collectively, this UDA capability means performance analysts can provide their investment teams with meaningful ex-post analysis that accurately reflects the outcomes of the investment process.

More recently, analyst demand for a single performance view of multi-asset portfolios has led to the development of hybrid models. Sylvan supports any combination of Brinson style, fixed income and other models to provide a single, portfolio-wide view of investment outcomes, which enables a broader perspective into both the macroeconomic forces that impact asset allocation decisions and the asset class-specific drivers of portfolio performance.

Sylvan further delivers more than 100 ex-post risk measures—from classic volatility, tracking error and correlation measures through to complex statistics used by many hedge funds—and by leveraging our extensible data model, analysts can upload and store ex-ante predictions. Clients can review these data points at any level, from individual security to an entire portfolio, to compare predicted and actual results. Using Sylvan’s web-based reporting and dashboards, clients are able to combine data views of ex-ante and ex-post risk alongside detailed and informative performance attribution to get an aggregated and enterprise-wide view of their portfolio performance—and uncover opportunities to improve it.

At SS&C, we are focused on supporting our clients by providing robust and leading analytical solutions to help inform and uncover potential investment risks and opportunities.

Read more about Sylvan’s full suite of capabilities, or contact us

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