Portfolio Compliance; putting your mind at ease.

The risks fund businesses face aren’t going away. The forces driving complexity are here to stay and will likely increase as member expectations change, more complicated investment vehicles are introduced, and the focus regulators are placing on funds become more onerous. All this reinforces how important the Chief Risk Officer (CRO) role is becoming.

Getting a handle on where you’re at

Gaining access to accurate data quickly is the first hurdle. Guaranteeing that your funds are managed within their mandates is important. Astute funds will ensure they are notified quickly of any situation where they go beyond these mandates. This is critical and more difficult to manage when markets are volatile.

So the question is how quickly can you be alerted when mandates have been breached? This question is often asked against a backdrop of siloed data, shared in spreadsheets, where its accuracy is often questioned. The data management processes are generally manual with limited tools available to the investment operations team. Let’s not pretend this isn’t the situation in many funds.

Pathway to automation

Alphacert believes the best solution is to automate, and portfolio compliance is a great place to start.

The first step is to truly accept data as a strategic asset.

Managing data as a strategic asset

Treating data as a strategic asset means you have a plan to move from managing the siloed and inconsistent data you have today to have the policies, procedures and tools in place to ensure that you are meeting the obligations you’ve made to members and regulators. We believe this plan should cover the key aspects of portfolio compliance outlined below.

Key components of portfolio compliance

What to look for when automating?

Any tool you put in place to automate your portfolio compliance processes will need to provide the following: –

  1. Daily set of mandate compliance checks
  2. Implement your business rules to monitor funds and portfolios
  3. Manage alignment with strategic asset allocation
  4. Track currency and portfolio hedging

Build vs buy

When making this call it’s worth considering: –

  1. The amount of resources you have to implement a system that is going to meet your needs.

It takes time and resources to work through a formal project process; defining requirements, building and then testing the resulting functionality. Then you have to consider maintaining the system as your data needs increase and the regulator’s requirements change. This is no easy job and if you don’t have resources you can dedicate to this, it isn’t worth attempting.

  1. Whether this is an area that will give your business an advantage over your competition? Let’s be clear, automating a compliance process won’t give you a competitive advantage. However, redeploying your resources to more meaningful work to discover and act on investment insights will.

In short, we don’t believe that automating the process yourself is a worthwhile option. Leveraging an existing solution will help reduce costs, get you up and running quickly and free up time.

If you’d like to find out how AlphaCert can help automate your compliance process, get in touch and we’ll start a discussion.

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