Evolving trends in the performance and risk market

By Justin Wheatley | 27 April 2017

On Friday April 7 2017 StatPro announced the acquisition of UBS Delta, an award-winning risk and performance service offered by UBS. The combination of UBS Delta with StatPro Revolution will result in one of the most comprehensive portfolio analytics platforms on the market. Both systems are fully multi-asset and there is some overlap of functions, but the specific capabilities of each, hugely complements the other.

Integrating software is not straightforward and when we were negotiating the acquisition, we analysed a number of ways of proceeding. Our main objective was to ensure minimal disruption for the clients of UBS Delta, to do this we estimate that it will take about three years to develop the unique UBS Delta functionality inside StatPro Revolution.

As UBS Delta, like StatPro Revolution, is a multi-tenant solution, there is just one installation of each system. This makes the migration of clients from UBS Delta to StatPro Revolution relatively straightforward. The biggest issue for any client is providing their data to a given platform. Because of our commonalities we will be able to reuse the files the clients currently supply to UBS Delta for StatPro Revolution. Indeed, during the transition phase, clients of UBS Delta will be able to start using StatPro Revolution, if they wish, without having to rewrite anything.

StatPro Revolution has been built with the future needs of asset managers in mind. For a start, everyone always wants everything to be done faster. Then as asset managers merge and merge again they are also developing huge scale, so they need a service, which has the scale to handle their data volumes. Greater precision is essential as a combination of increased regulation and more demanding clients push the boundaries of the calculations required. So the challenge for a service provider like StatPro has been to imagine a platform with the technology to handle this need for speed, scale and precision.

The smooth production of analytics is comprised of three fundamental components and each can be managed separately. The first is to check the input data to ensure accuracy and completeness. Data checking is the bane of performance measurers around the world, and getting data right is incredibly complicated because of the sheer volumes of information. This requires hundreds of configurable data controls and scalable computing power to automate this process in a way that has never been possible before.

Once you have your data right, the next step is to produce as many types of calculations as you want to satisfy everyone’s needs.  That might be simple performance measurement, elaborate attribution analysis or complex ex-ante risk. There are always more analytics that asset managers want to produce.

Finally, each user needs information presented in a way that is useful for them. A fund manager analysing his portfolio has different needs to someone monitoring risk across many portfolios or producing client reports or complying with a new regulation. Thus the flexibility of the interface and a Web APIs is essential.

We believe that the market is trending to a situation where asset managers will increasingly want to outsource their data management processes to fund administrators. The fund administrators will then supply clean data back to their asset manager clients who will then perform whatever analysis they need with this cleaned data. Fund administrators will also offer more and more services to produce anything that is standardised like regulatory reporting or even client reporting.

The reason why fund administrators have not taken a bigger market share already is simply because the systems they currently use hinder them from offering the service they would like to provide. They lack flexibility, responsiveness and sophistication. The result is that some asset managers have taken back in-house outsourced performance and risk processes.

Adding UBS Delta capabilities to improve StatPro’s infrastructure for fund administrators, thus providing a far superior service, was the motivation behind the acquisition. We have several fund administration clients that are using StatPro Revolution to manage the data cleaning part of the process. Their clients then use Revolution’s web interface to access the analytics they want. Data management benefits from economies of scale, so the more asset managers that are on a fund administrator’s platform the better. On the other hand, analysis is often very personal. Each fund manager might want to assess the analytics in their own way. This need for uniqueness requires flexibility, which Revolution has.

A major cause of inefficiency with any asset manager is multiple calculations of performance for the same portfolio by different systems. However, because most systems have been created over the years to be self-sufficient, they each duplicate each other. Older systems tend to be poor at sharing information so the only way for data to be extracted is via a basic report. This is a very inefficient method of communicating between systems, which is prone to error and hard to control. It also results in the proliferation of multiple sources for the same data.

The way forward is to use Web APIs (Application Programming Interface). This allows one application to ask the other application for specific data that is needed as and when it wants it. We have a successful tie up with a fund administrator that supplies a risk solution but which does not offer performance. They use our Web API in Revolution to get performance results. They then display these results in their interface. From the perspective of the client, they see just one system that now combines risk and performance. Our fund administrator client has saved a huge amount of work by just making a simple API request.

Most asset managers, especially the larger ones, require this same efficiency. For instance, every asset manager needs to build a website and ensure that it can have up to date performance and risk data. However, most asset managers have torturous processes to achieve this with the result that data on their websites is usually stale and of limited use. If they were able to control all their portfolios on one system and then use a Web API to distribute this information wherever they wanted to send it, they would solve the problem of data control and hugely improve their efficiency.

No platform will ever provide everything, but by being open with aWeb API, we don’t have to. However, we do aim to provide as much as we possibly can. This is where our acquisition of UBS Delta fits in, as does our acquisition last year of Investor Analytics. Each of these services does something special and unique. Each required their clients to feed the service with their data. By combining all these services we are offering our clients far more value and greater convenience. By integrating these other services into our technology, we will also make it easier for our clients to access and integrate our output with their own infrastructure via the Web API.

The shopping mall metaphor seems most appropriate to describe this strategy. The more shops in a mall, the more prospective clients will come. The more convenient it is to park, the more enjoyable it is to stay, the wider the range of entertainment and places to eat, the more people will make a day of it and so shop. This cluster effect also applies to software platforms.

StatPro has been on a long journey to completely reinvent all its technology so that we can offer our clients all our savoir-faire in the most convenient way possible. I believe that we have now largely completed that journey of transformation, but the next stage is to expand the range of services we offer so that our clients can make their businesses even more efficient.

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