The systems that process data and information have become key competitive differentiators for institutional investors in today’s complex financial marketplace. It’s fair to say that better systems provide better data, which, in turn, drive better investment decisions and superior investment performance. And one aspect of these systems is, I believe, particularly important: the measurement and attribution of performance. .
Today’s leading investors view performance attribution as more than just explaining the past; it is seen as a tool for making better investment decisions in the future. Accurate, timely, and detailed attribution helps measure skill and sources of active return and can thus help strengthen investment teams and improve portfolio performance. I think this is such an important topic, in fact, that I wrote a short paper on the subject with some of my colleagues at AIMCo.
Indeed, Leo De Bever, Jagdeep Singh Bachher, Roman Chuyan and I recently published a paper entitled, “Towards the Next Generation of Performance Attribution for Institutional Investment Management.” In it, we describe our experiences in developing an effective performance attribution system at AIMCo. Here’s what we find:
“In sum, we have found over the past four years that strong investment performance requires providing good people with continuous performance evaluation feedback from good business systems. This, in turn, drives informed investment decision-making and better performance. There is always room for improvement, but it is already clear that better data, systems, benchmarks, and decision-based attribution are having a measurable impact on our ability to target superior results.”
Download the short paper here. We hope it’s useful for other organizations considering similar data platforms. Comments and critiques are always welcome!
