Characteristics of a Performance Book of Record EAGLE INVESTMENT SYSTEMS

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1 Characteristics of a Performance Book of Record EAGLE INVESTMENT SYSTEMS

2 The Performance Book of Record A new approach to gaining a complete view of assets under management, performance, exposure and risk

3 3 // THE PERFORMANCE BOOK OF RECORD Walk into any investment management firm, large or small, and you ll generally find a host of spreadsheets, desktop applications and performance measurement tools that tactically calculate and analyze performance and risk. Usually these systems (such as they are) deal effectively with one specific asset class. But even taken together they fail to provide a view into all assets under management, firmwide investment performance, leverage, exposure and risk. Factor in greater levels of complexity, increased regulatory pressure and stricter internal compliance not to mention the imperatives of speed and accuracy and the need for a true total view, achieved with maximum efficiency, is clear. 54% of senior data management and financial technology decision-makers say they are NOT able to access a single consolidated view of investment performance data. The numbers tell the story. In a recent Waters Technology survey of senior performance, data management and financial technology decision-makers, 54% of respondents said they were not able to access a single consolidated view of investment performance data. In day-to-day terms, more than half of all CIOs, investment committee members, portfolio managers and operational teams are cobbling together disparate pieces of information in an attempt to meet performance reporting goals. Not only is this process astoundingly inefficient, but also the resulting performance analyses may differ depending on the audience or client. Increased operational risks and costs, plus potential penalties for misreported information, are the consequences. The survey revealed even starker scenarios of inefficiency and risk. For instance, 72% of respondents said that they needed to aggregate data across multiple systems to produce management- and client-level reports. Sixty percent of them use two or more systems to calculate performance across different client types. Surprisingly, 9% of firms use 10 or more systems. It s not surprising that only one in five (21%) survey respondents are very satisfied with his or her organization s ability to access timely, accurate and relevant performance data. Clearly, many firms need to produce a consolidated performance book, yet few are able to do so efficiently, if at all. 60% of firms use TWO OR MORE SYSTEMS to calculate performance across different client types. Why a PBOR? There will always be a place for asset-specific quant tools to meet certain tactical analysis needs. But the landscape is changing. The investment management industry is buzzing as firms are recognizing the need for enhanced, comprehensive Investment Book of Record (IBOR) solutions. Vital as IBOR is, however, it is just one solution for asset managers coping with industry change. Asset managers are seeking a true total view encompassing not only investment information, but also integrating performance results, exposure analysis and other enriched information across all lines of business and all asset classes. This is a complex endeavor for diversified asset pools that include alternative and other non-marketable investments like derivatives, private equity, real estate and structured products. With a Performance Book of Record (PBOR), investment management firms have visibility into all investments and results. A PBOR enables performance and risk analysis in one consistent and efficient system. Eagle Investment Systems provides a strong and innovative data management solution, plus a broad product offering, that uniquely positions us to help organizations meet these objectives and achieve their PBOR each day, seamlessly.

4 4 // THE PERFORMANCE BOOK OF RECORD Why Eagle? Eagle is driven to help clients meet the imperative for independent, auditable and exception-based toolsets that support the entire investment management enterprise. Eagle s hallmark is the single version of the truth : consistent data lineage, processing and calculation methods across an organization s unique intersection of investment vehicles, managers, strategies and asset allocations. Eagle has set the standard as the industry pursues IBOR solutions based on the same foundation that empowers its Performance Book of Record solution. Eagle s innovative technology enables detailed and data-intensive risk reporting, visibility into value added analysis, and regulatory reporting. The Eagle Performance data-centric approach has proven itself to keep pace with industry changes. Using the Eagle platform investment organizations can achieve their own PBOR solution, one that drives scalable performance and risk measurement and analyses on an enterprise level. Achieving a PBOR: Requirements for every investment firm Any investment management firm wishing to benefit from a PBOR in their reporting and analysis processes must first evaluate its capabilities vis-à-vis several key business principles: Data governance Data consolidation (without recalculation) across multiple sources Traceability to original data sources Schedule automation and process inter-dependency Data validation and error handling Data granularity and calculation flexibility Look Through into securitized and structured instruments Data enrichment to address lag priced assets, notional exposure-based instruments and multi-legged returns Management of composited portfolios and nested composites hierarchies Flexible attribution analysis across multiple portfolio benchmark relationships Integration of historical performance data of differing periodicities since inception Performance analysis from security levels through strategic asset allocation portfolio hierarchies Firms seeking the advantages of a PBOR must understand: It s all about the data. Data from the start, data at the heart of the solution Historically, managers that invested across multiple asset classes could not be confident that a single system could meet their needs. Most felt that a single system could not provide a complete performance and risk analysis view of their entire investment book, or a level of detail that included views into direct and underlying exposures. Eagle s data-centric approach helps eliminate this problem, bringing confidence to PBOR reporting and analysis support. Eagle enables all types of investment management organizations to acquire, consolidate and share data in a single ecosystem of functional engines, leveraging one database. With strict source data integrity that does not lose sight of the original state of information, data lineage can be evident. Moreover, Eagle offers a multitude of tools capable of enriching, aggregating and normalizing information in order to build a consolidated view of investments and generate a reliable PBOR. BUSINESS INTELLIGENCE RISK ANALYSIS ATTRIBUTION ANALYSIS Build your firm s performance and risk measurement strategy on a solid foundation Access portfolio management, performance measurement, attribution, ex-post and ex-ante risk solutions from a single platform, using one common data set. RETURN CALCULATIONS DATA MANAGEMENT & ACCOUNTING

5 PBOR Challenges, Eagle Solutions Keep in mind that every firm faces unique challenges so there s no one size fits all PBOR solution. However, Eagle s experience, combined with our Data Management and Performance solutions, positions us prominently to assist organizations in developing their PBORs and meeting their special PBOR implementation challenges. Let s now look at some of the key PBOR challenges, along with Eagle s distinctive and powerful approaches to solving them.

6 6 // THE PERFORMANCE BOOK OF RECORD Calculating and delivering performance based on different accounting rules and data derived from disparate accounting and recordkeeping systems or sources Comprehensive, seamless data consolidation Eagle Performance can integrate market data using standard adaptors to load security reference data, index data, and analytics from just about any data vendor, accounting system or custodial source. (Naturally, Eagle Performance integrates seamlessly with Eagle Accounting.) Ensuring that detailed, security-level performance data is available and accurate. Some vendors require data to be reprocessed through an accounting system in order to get a consolidated book of record. That data, however, is often different from the data that is needed to support the investment view (IBOR) and may create difficulties with reconciliation, add operational risks and increase overhead costs. All data in a single location Eagle provides generic tools for acquiring data, and supports rules for each unique source or type of data. In Eagle, interfaces, data enrichment, performance measurement, attribution and risk analysis are all shared components. The same framework also controls process automation and management, enabling exception only user workflows. Integrating and calculating performance for different asset classes that have unique analysis requirements (e.g. private equity with lagged/non-lagged returns, real estate with actual vs. projected cash flows, derivatives with notional and/or effective exposure simultaneously) Highly flexible data enrichment capabilities Eagle technology has always delivered flexible and transparent tools that give permissioned users authority to review and edit business rules. We combine them with innovations like data enrichment of derivative data and analytics generation to empower more insightful performance analysis. Thus, with Eagle Performance, users have a process to enrich and properly evaluate derivatives and long/short positions while gaining a full, exposure-based view of their portfolios on a notional and market value basis. Calculating performance across multiple client, portfolio and fund types with different and discrete measurement requirements (also known as calculating performance across multiple business lines) Sophisticated, robust return calculations Eagle s calculation capabilities meet complex and differing business requirements across investment types. Eagle Performance provides an extensive library of industry-standard performance calculations for portfolios, composites and retail funds on a gross and/or net basis Eagle Performance includes a comprehensive set of NAV-based calculations for retail funds including pre-tax, post-tax, post liquidations, convertible class and synthetic risk returns reward statistics Additionally, it includes modules for calculating security and asset class performance, retail (1940 Act, UCITS, etc.) performance, and GIPS composite performance, to name just three examples

7 7 // THE PERFORMANCE BOOK OF RECORD Calculating different types of returns (e.g., net of fees, gross of expenses, before/after tax or on a notional or economic exposure basis) in a single platform Custom calculations Eagle delivers many out-of-the-box calculations that reflect our experience serving a wide range of clients with differing needs. These calculations include principal/ income returns, base and local gross, net returns, after tax and others. Eagle is also fully configurable, never black box users have transparency into calculations and are able to define custom calculations as needed. Achieving and maintaining regulatory compliance Compliance-capable technology Increasingly complex financial instruments plus increasing compliance demands equal increased risk exposure for investment management firms. Eagle technology is prepared to mitigate risk through: Integrated GIPS composite management with integrated disclosure management no need to maintain additional systems Proactive product management that works with clients to address new compliance demands A dynamic reporting platform to support the increasing information and statistical analysis required by regulatory bodies across the globe Enabling a firm s unique benchmark management needs Flexible, custom benchmarking Eagle provides robust custom benchmark capabilities to address reporting and attribution analysis requirements. Aggregation of constituent level index data drives insightful analysis through the use of various custom benchmarks (including blended, automatic floating and resetting of weights, sub-indices, hedged assumptions, currency conversion, constrained, carve-out and hurdle benchmarks). 72% say they need to aggregate data across multiple systems to produce managementand client-level reports.

8 8 // THE PERFORMANCE BOOK OF RECORD Addressing ex-post and ex-ante risk analyses and modeling to meet the greater demands across the regulatory landscape Performance attribution and risk analysis capabilities Eagle s risk analysis capabilities stand alongside and are integrated fully with the Eagle suite of solutions. Its configurable risk modeling framework synchronizes with a firm s portfolio management style and delivers consistent and clear results: Risk measures can analyze historical and forward-looking views in portfolios and composited strategies Clear identification of currency effect and ability to factor in hedging in attribution analysis Equity attribution methodologies that decompose returns by selection, allocation and interaction Granular fixed income attribution returns-based model that disaggregates total return into its yield, price and currency components Flexibility to combine all asset classes into a single attribution and risk analysis, without limitations on analyzing balanced portfolios 60% of firms use two or more systems to calculate performance across different client types.

9 9 // THE PERFORMANCE BOOK OF RECORD Enabling users to efficiently optimize and leverage data for analysis and reporting. User-friendly functionalities If data is to be actionable, it must be visible and accessible to managers and decision-makers. Eagle delivers on both counts with: A highly scalable platform that can process a high volume of portfolios and client accounts Solutions delivered through a secure private cloud to facilitate access from anywhere, at any time Business intelligence capabilities to support data visualization and ad-hoc analysis through web browsers and mobile platforms, putting capabilities at any user s fingertips Extensive standard report catalog, on-line analysis and client facing portal Flexible reporting with query and reporting analysis drill-down tools able to look through underlying assets and securitized holdings Data quality management issues, with the end goals of auditing returns and close periods to lock published values, and managing preliminary to final return status, including: Identifying data quality and tracking consistency issues or errors that necessitate performance returns recalculation or analytic data refresh Identifying and addressing the impact of backdated or corrected data, and sequential portfolio and composite hierarchy recalculation as necessary Identifying and addressing the enrichment of incomplete data for complex instruments like derivatives (options without market values, swaps without payment and receipt legs, synthetic cash balance offsetting) and non-marketable assets (lagged valuations and flow recognition on real estate and private equity partnerships) Exception-based workflow Eagle s robust data management and monitoring tools are designed to process by exceptions. Eagle dashboards allow managers to easily view exceptions and promptly take corrective actions. When firms address data issues early and prior to performance measurement, efficiencies can be gained. Performance analysts are freed to analyze data and results, avoiding time consuming tasks like identifying data discrepancies. Only one in five (21%) firms are very satisfied with their ability to access timely, accurate and relevant performance data.

10 Case Studies: Business-specific PBOR solutions Firms across five continents use Eagle Performance today. They represent a range of businesses including insurance, retail fund management, investment managers, government funds and high net worth managers. Each type of firm experiences unique challenges; here, we highlight the specific Eagle capabilities that help different types of firms achieve an enterprise PBOR solution. For Government and Pension Funds COMMON CHALLENGES Managing across all asset classes, including alternative investments Numerous (often external) sub-managers Lack of look-through into sub-advised investments Coordination of overlay program Data incompleteness on hedge positions and swap legs Limited transparency into full economic exposures Top-down global asset allocation validation Poor liability-driven investing tracking and analysis EAGLE SOLUTIONS Data-centric performance and data management Source system record uniqueness and source hierarchy-based processing Manager or sub-strategy level contribution to return analysis Security look-through and exploded view of holdings during performance attribution Ultimate issuer exposure tracking and reporting Multi-currency, overlay and hedging-aware performance analysis Enriched view of economic exposures on leveraged instruments Management of alternative investment lagged pricing issues Liability-driven investment analysis and liability benchmark attribution Single and accessible PBOR for all portfolios and business lines

11 11 // THE PERFORMANCE BOOK OF RECORD For Managed Accounts and Asset Servicing COMMON CHALLENGES Management of data across complex hierarchical account structures Pooled plans, legal structures and family trust tracking Product and trust structure look-through to all underlying assets Incorporating all assets in performance and benchmark relative analysis Data entitlement control for multiple sub-clients/business groups Scaling for client, asset and complex transaction growth Client web portal and on-demand data access requests Business intelligence tools and mobile client reporting demands High volume data and process management EAGLE SOLUTIONS Data-centric performance and data management Source system record uniqueness and source hierarchybased processing Multi-currency, overlay and hedging-aware performance analysis Composite and portfolio hierarchy management Client household hierarchy-based performance analysis and attribution Securitized fund-look through to determine full exposures Highly scalable cloud-based solutions as a service Business intelligence, web-portal and mobile reporting solutions Data entitlement capabilities by business group Single and accessible IBOR and PBOR for all portfolios and business lines For Institutional Investment Managers COMMON CHALLENGES Managing across multiple custodians and accounting systems Retail fund compliance for domestic and foreign market distribution Large institutional client directives and pursuit of new mandates GIPS Compliance Multiple lines of business with differing requirements Managing diverse index and benchmark data sources and processes Portfolio manager monitoring and decision tracking Accurate and timely investment book of record EAGLE SOLUTIONS Data-centric performance and data management Source system record uniqueness and source hierarchybased processing Flexibility to manage standard retail fund and custom institutional portfolio performance in one system Global processing schedules based on business line information delivery needs Security reference data management functionality Index data management and custom benchmark creation Single and accessible IBOR and PBOR for all portfolios and business lines Conclusion Research has shone a spotlight on two significant issues facing high-level decision makers in investment management firms, regardless of their business model: 1. Lack of visibility across the enterprise into asset performance and risk. Without such visibility, firms are ill equipped to respond to internal, regulatory, client and competitive challenges. 2. Inefficiency in aggregating, measuring and analyzing the data that would afford such visibility. Ad hoc practices and lack of systems sophistication add costs, waste time and potentially increase risk exposure. A powerful and effective solution is a consolidated, enterprise-wide performance book of record, or PBOR. Armed with this transparent, consistent approach for generating performance and risk data, firms are able to meet their challenges head on. Scalable, data-centric, enterprise-level technology from Eagle Investment Systems including Eagle Performance, Eagle Data Management and Eagle Accounting leverage data from existing sources, employ exception-based processing and offer custom calculations that help asset management firms achieve a PBOR. Eagle is the industry s first and only true PBOR solution.

12 WE ARE EAGLE INVESTMENT SYSTEMS Eagle Investment Systems LLC enables financial Institutions to grow their assets by creating operational efficiencies and delivering award-winning solutions for data management, investment accounting, and performance measurement and attribution, supported by an unparalleled level of service. Eagle deploys its solutions via a secure private cloud, Eagle ACCESS SM, which hosts and provides on-going support of the applications and systems infrastructure, reducing complexity and risk. Eagle Investment Systems LLC is a subsidiary of BNY Mellon. Additional information is available at Americas Asia Pacific EMEA +44 (0) Mainland China sales@eagleinvsys.com 2015 Eagle Investment Systems LLC. All rights reserved