Explaining the Utility of Portfolio Exposure Management Software

Explaining the Utility of Portfolio Exposure Management Software
CT McLean

Your investment committee meeting is 2 days away and you have a big problem. Tasked with aggregating the exposure data for all 20 of the organization’s hedge funds, you are staring at a myriad of Excel sheets and PDFs. “Manager A” reports their geographical exposure as Asia ex-Japan; “Manager B” uses Developed Asia and Emerging Asia; and “Manager C” groups Australia and New Zealand in their categorization of Asia.

The operational issue associated with a complex portfolio is that monitoring exposure to a broad array of asset classes, investment strategies and global markets is a complex, arduous task when handled manually, with significant room for error and unintentional oversight. A robust portfolio management system with exposure analysis must be able to “translate” this raw data into the way your investment committee expects to see the portfolio breakdown. Exposure analysis within broader portfolio management software is essential for asset allocators to ensure they are adequately – but not excessively – exposed to certain regions, sectors, market capitalizations, currencies and even underlying holdings.

Providers with offerings tailored toward alternative assets recognize that each investment carries unique attributes. The ability to monitor allocations at multiple granular levels, and slice and dice the data by any criteria is invaluable for both performance tracking and investment research.
Firms using dedicated portfolio management software also benefit from these platforms’ ability to incorporate benchmarks for their exposure tracking. These external benchmarks are seamlessly integrated into the dashboard view, enabling users to easily compare exposure relative to performance, and adjust the portfolio accordingly.

Finally, dynamic and ad-hoc reporting using the most up-to-date data available are key to addressing the needs of both Chief Investment Officers and investment committees. You should be able to quickly analyze the Asian telecomm exposure across your long/short equity hedge funds without spending two days trapped in Excel jail.