How to avoid Portfolio Management System implementation pitfalls - Davies

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How to avoid Portfolio Management System implementation pitfalls

Many implementations are not delivering as expected

There are several extremely powerful end to end Asset and Wealth Management portfolio management systems available on the market. These systems are extremely attractive and promise significant benefits supporting the whole investment life cycle; however, many of these implementations are not delivering as expected.

Licences in old systems continue to be renewed, and project timelines get extended, all adding to the cost of the implementation. Some of the system’s functionality may not operate correctly, particularly for more complex assets. Old systems fail to be decommissioned, and ad hoc workbooks are built as workarounds.

What, then, are the steps and actions that are needed to avoid these pitfalls?

Define Requirements

First, you must have conducted a thorough requirements analysis. This should define the assets in detail, the portfolio analysis, and the benchmarks that you need the vendor of your system to support. These should be presented to the vendor for sign off to ensure they can fully support all these requirements.

Define Assets and Benchmarks

Bespoke assets and benchmarks should be clearly identified and specified. Failure to do this may leave you trying to engineer solutions later rather than have the vendor do it for you. Your requirements for benchmarks should be set out well in advance. There is often a long lead time to license and build benchmarks.

Strong Subject Matter Expertise (SME)

Most vendors are strong on processes and systems but tend to be weaker on asset classes and investment applications. That is why you need SMEs who are experts in your asset classes but also understand your investment styles and how you want to use applications on the vendor’s system.

Robust Data Mapping

A key task in any implementation is loading your assets from your old system into the new system. Assets are usually created or stored in an Asset and Wealth Management system in a security record. There can be multiple panels in a security record and tens of fields that need to be set correctly. The vendor will provide an outline of how to do this with a mapping guide for their system. However, the Asset Manager must build the mapping and the software to do this. Equities are straightforward, but the task becomes more complex along the complexity spectrum, from equities to bonds to OTC derivatives to structured products. This requires SMEs in both the asset classes and security record settings. The security record is central to most systems. It drives every application. For example, the information in the security record is used to drive the system’s valuation and risk calculations. This is the information that will be used in risk analysis and reporting. If the setups in the security record are wrong, you will get bad value and risk and wrong risk analysis and reporting.

Davies has successfully implemented end to end solutions for several Asset and Wealth Management firms, a recent example being a manager with a large Liability Driven Investment book and quantitatively driven strategies, multi-asset funds, global bonds, and equities. We have tens of years of experience working with leading technology providers; please get in touch with us to find out how we can help you make your technology change a positive and effective experience.

About the author

Raphael de Santos


Asset & Wealth Management

I've developed policies, led teams in market data, index and portfolio construction, equity derivatives strategy, and research and trading.

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