Investment Metrics

Article published on FundFire, October 21, 2011

Question:

As an asset manager trying to catch the attention of consultants and institutional investors and make an impression, how can our firm strategically manage multiple databases to find success?
- Asset management firm, U.S. Northeast

Answered By: Susan Benedetto is a director and product manager at Investment Metrics, an independent provider of investment performance and reporting services to financial professionals.

Answer:

Due to finite time and resources, some managers have no choice but to limit the thoroughness of their database responses or the number of databases that they update. Their desired goal of wanting to do a thorough job does not always match the practical decision to take shortcuts. Managers make that decision mostly because of competing deadlines and commitments, having resources that are shared, or being understaffed.

How, then, should a manager strategically manage its database efforts to ensure breadth and depth of responses?

Right now, asset managers are subjecting their staffs to the task of populating a dozen or more of the estimated 60-plus investment manager databases, according to A.S.A.P. Advisor Services. These databases aggregate a large quantity of factual data that can be compared, measured and converted into information that helps drive investment decisions. And, yes, populating these various databases is a challenge for many managers. Professionals can spread themselves thin trying to cover all the various databases, and submitting data is a waste of time for a manager (and the consultant) when a profile is sparsely populated or outdated. It is vital that all information is current and consistent within a single database, and from one database to another. Consultants also stress the need for consistency between a manager’s presentation materials and database responses.

To better navigate the vast database world, managers should categorize databases into two distinct segments: consultant proprietary databases that capture the most relevant information required by that particular firm, generally for its own use only; and a third-party database that collects data on behalf of many end-users and distributes it through proprietary applications or to other third-party application-providers. Consultants overall use a combination of both database types for performance measurement and analysis, investment research, client reporting and a complement to RFP responses. Consultants often use a combination of data from multiple databases and RFP responses.

Before submitting information in the database, managers need to ask, what are consultants looking for and which data fields are most important. In crafting responses, managers also need to focus on the intended outcome. They need to gauge whether the consultant is searching for a manager to fill a specific mandate for a client. Is the consultant evaluating a broad asset class or a sub-style category to spot trends? It is also important for managers to determine whether they need performance tracking to provide audited returns to clients.

Remember that consultants require a variety of data, and different consultants have different feelings on what is most important. A consultant can use any combination of data as an aid in the manager search and selection process, for investment due diligence, or for monitoring and client reporting. Some consultants prefer to have a basic understanding of a firm in advance of a meeting or telephone call with a portfolio manager. This allows more time for a deeper conversation about investment process and philosophy later on.

Asset managers looking to maximize the efficiency of their staff and resources should also give careful consideration to the databases they are updating by assessing how consultants use their data within and between other databases or applications. Consider prioritizing the database effort around known sources, mutual market segments and distribution opportunities. Most importantly, make every effort to fully complete questionnaires.

The ultimate goal for an asset manager populating multiple databases should be to convey a clear, consistent and complete message to the marketplace. Although there are never any guarantees, managers with a presence on multiple databases can make their firm stand out and help consultants find the manager wherever they look for data.


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