The State of Performance Measurement for Institutions and Asset Managers

Finadium Research Report

The State of Performance Measurement for Institutions and Asset Managers

Finadium
May 2010

Regional Focus: North America and Europe

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Performance measurement is a critical part of the investment management process for institutions and asset managers. Institutional clients want increased granularity and transparency across asset classes. Multinational plan sponsors are evaluating pension plans regardless of jurisdiction on a consolidated basis. Asset managers recognize that providing accurate and detailed performance attribution matters not only to investors but to internal fund strategies as well. A complete view of analytics, attribution, and risk exposures has become an essential part of performance reporting.

The interest in outsourced arrangements and third party technology among producers of performance data has resulted in a plethora of performance measurement providers, some with niche capabilities, others with broad-based strengths. Vendors include custodians, consultants, independent technology firms, spinoffs of asset managers and a variety of combinations of these firms.

The next major hurdle facing institutional investors in performance calculations and reporting involves ever changing investment options. The necessity of meeting an expected return has resulted in greater asset allocations to alternative investments. As this trend increases, providers and buyers of performance measurement face a dilemma in selecting calculation methodologies and retrieving one performance figure across the entire plan.

This report is based on primary Finadium interviews with users and service providers of performance measurement. We also gathered data on consulting firms, custody banks, performance software providers and asset managers, with a focus on the competitive dynamics and levels of cooperation between global custodians and third party vendors.

This report should be read by vendors and users of performance measurement solutions, including pensions, investment consultants, asset managers, custody banks and third party vendors, particularly those who are involved in or are considering participating in an outsourced middle office or performance measurement solution.

This report is 24 pages with 6 exhibits.

TABLE OF CONTENTS
■ Executive Summary

■ Why Measure Performance in Asset Management?

■ A Short History of North American and European Performance
Measurement and Other Vendors

■ Custodians and Other Vendors
– Independent Technology Providers

■ The Role and Value of Investment Consultants
– Investment Consultants as Buyers of Performance
Measurement Technology
– Should Consultants Outsource Performance Measurement?

■ The Asset Manager Perspective, Or, How Much Does Outsourcing
Matter?

■ Evaluating Costs, Risks and Outcomes
– Measuring Performance for Alternative Assets

■ About the Author

■ About Finadium