Everyone in the investment world is facing greater demands for transparency, creating a critical need for more streamlined processes and cost efficiencies. Institutional Investor and Backstop Solutions recently convened a discussion of institutional investment professionals to discuss how their peers who must deliver on defined benefits can leverage technology to overcome the challenges of being overworked and understaffed, and to ultimately manage portfolios with greater transparency and responsiveness.
At the table were:
- Mark Steed, Deputy CIO, Arizona Public Safety Personnel Retirement System Trust
- Mark Montoya, Investment Analyst, Public Employees Retirement Association of New Mexico
- Ken Akoundi, Tech whisperer to long-term investors
- Chad Erwin, CEO, Em & Av LLC
Here are some of the highlights of the discussion.
- “Transparency is the watch word of the moment,” said Mark Steed, Deputy CIO, Arizona Public Safety Personnel Retirement System Trust. “It’s creating greater expectations and costs, and adding new layers of process – a lot of additional work in a short time window. Most of our portfolios have a high number of alternative investments than they once did. We’re all in this because it’s an inefficient space, but that inefficiency creates high operational demand – you need to streamline your data, terms, and information for the consumption of your stakeholders. And there’s not a lot of homogeneity in the underlying holdings. If you have a small team, the only way you survive is by investing in technology solutions.”
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- “Being a public pension, we are constantly creating transparency reports and responding to requests for information,” said Mark Montoya, Investment Analyst, Public Employees Retirement Association of New Mexico. “There is always new legislationasking for more data to be provided to our oversight bodies, and we support and understand the efforts to make the dealings of government institutions transparent to the public. That being said, this does place additional work on our staff. There are several things we try to do to ease the burden, including trying to keep all of our data in order, and leveraging our vendors to aid us in gathering and compiling the data. We are consistently evaluating how we do things and try to implement best practices and make our procedures more efficient.”
- “Over the past 20 years, investment offices have made asset class-based technology decisions,” said Ken Akoundi, Tech whisperer to long-term investors. “The private equity people have one system, hedge funds another. And those systems don’t talk to each other. So, when you have to produce a packet for the CIO, you have all the different systems being dumped into an Excel spreadsheet, and then someone has to spend a lot of time formatting and interpreting. I call that Excel ballet.”
- “If you find it necessary to open and review a legal document that’s already been reviewed by your legal team, that’s killing your ROI,” said Chad Erwin, CEO, Em & Av LLC. “Your legal team should have pulled out the specific risk disclosures that are important to you so you have them at your fingertips. That work should only be done once, so if someone's doing it, leverage it and figure out how that process flows through. It’s easier said than done to take a step back and do that, but usually hours today save you weeks if not months down the road.”
- “There is clarity that comes from implementing technology when you go through the exercise of automating some of your processes,” said Steed. “You’re forced to think about the stuff that matters. Do I want to just an image of this of this paragraph? Do I want a dropdown menu or options? Do I want multiple choice? Do I automatically want analytics when I’m on this issue? Do I really care about this piece of information? From a meta standpoint, there’s a surprising amount of clarity that comes from this process.”
- “It drives me nuts that managers send a DDQ in a PDF format that they can’t necessarily copy and paste from, or that a lot of them want to send their own DDQs to people and have them fill it out and return it,” said Erwin. “Unless you’re a huge investor, chances are some of those managers don’t want to waste the time. It’s complex on both sides.”