Pension plans and other institutions are increasingly doing more investment decision-making in house. By doing so, these institutions can control costs and improve transparency, and have more control over their fiduciary responsibilities and the potential to maximize long-term returns.
The key to successfully incorporating investment responsibilities into the flow of an institution’s daily routine is to remove the roadblocks that often occur in the investment process. Research management, due diligence, and portfolio management are fraught with potential logjams. These backups are frustrating and take time away focusing on investment strategy.
Invariably, investment professionals make the best use of their time when they stop wasting it on process mishaps. One way of solving this challenge is by leveraging technology to the fullest. A recent e-book from Institutional Investor, “Top Time Wasters for Institutional Investors,” examines how asset-rich institutions can overcome their traditionally technology-poor approach to their investment process.
The book includes interviews with several CIOs and investment technology experts. Key takeaways from the book include:
- Often, instead of flowing freely across an organization, data is restricted within silos. This results in vital facts being buried and important connections being missed. In the end, decisions are made that would never have been made if all the data were aggregated and prioritized properly.
- Without leveraging technology as a central brain to coordinate research management, each silo within an organization does its own thing, and those who need the results of their work are left to track them down piecemeal or stumble upon the information.
- Technology can dynamically push critical information to stakeholders for consideration and analysis, eliminating data noise so that the investment committee can focus their attention on matters of key interest.
- Challenges such as administration, reporting, and due diligence are part of the normal course of doing business, and most pension plans seem to be on top of them. Yet some experts say that sense of control may be illusory, and that what works during normal periods may not be sufficient when markets turn volatile.
- Sophisticated technological capabilities enable pension plans to efficiently shift allocations in response to changing market and fund conditions.
- Today’s institutions have more alternative investments than at any time before – but each of those alternatives has a different structure and terms. The inefficiency of the alternative space is what makes it attractive, but it also creates high operational demand to streamline data, terms, and information for the consumption of your stakeholders. Since there isn’t a lot of homogeneity in the underlying holdings of alternative investments, technology becomes critical for any in-house investment team.
- Technology can help create an opportunistic portfolio by providing identifiable and quantifiable feedback to pragmatically assess opportunistic decisions, while still allowing easy access to your aggregated portfolio.