Portfolio accounting encompasses back-office tasks, which can be time-consuming and hard to manage. These tasks become more voluminous and complex as firms expand and add clients and portfolios. Every firm wants to achieve growth, and portfolio accounting growth needs to be managed efficiently.
This goal is attainable when organizations have the right software and the technology in place. That’s the first layer. The other area of concern is having the necessary personnel in place to handle higher volumes of back-office tasks. Talented people are often hard to find and expensive to hire. This is why investment firms seek out outsourcing solutions staffed by third-party experts.
The Role of Advanced Portfolio Accounting in Business Growth
How does an investment firm’s portfolio accounting impact growth goals? Firms know that the back-office workflows associated with portfolio accounting must be streamlined and made more efficient so that they can scale with larger volumes in terms of clients and the activities surrounding managing their portfolios.
Portfolio accounting growth is a good problem to have for any firm. It means they have more clients, portfolios, trades, and transactions. However, they need more efficient investment portfolio accounting software to keep pace with these areas. Effective portfolio accounting software must provide automation throughout the complete accounting lifecycle. Advanced technology can elevate these capabilities by applying business process automation and also practical artificial intelligence (AI) tools that support investment accounting, reconciliation, performance, reporting, and billing for clients.
Key Features of Advanced Portfolio Accounting Software
A complete set of features is one of the basic requirements that makes portfolio accounting software solutions more advanced. This must be a cornerstone in the feature set. A primary list of functionality to seek out includes:
- The ability to manage all back-office portfolio accounting and maintenance functions related to holdings and transaction archives, capital changes, dividends, and pricing.
- Full ABOR (Accounting Book of Record) and PBOR (Performance Book of Record).
- Multi-currency, multi-asset investment accounting functions for portfolio valuation and NAV reporting, performance calculations, and client billing.
- Automated reconciliation tools to streamline recon activities.
- Analytics functionality to measure performance and attribution, including portfolios, composites, asset classes, sectors, industries, analyst classifications, and securities.
- Built-in compliance with the Global Investment Performance Standards (GIPS).
- Historical holdings and transaction information are easily accessible, centralized, and easy to search.
- Multi-tiered client billing, as well as statements with report customization options.
- Reporting outputs that include client statements, investor presentations, portfolio holdings, historical transactions, portfolio analysis, and client invoicing.
- Online delivery of client statement reporting.
Benefits of Advanced Portfolio Accounting for Business Growth
Having all of the features defined above provides opportunities for firms to grow. The benefits organizations can realize allow them to work smarter and more efficiently without impacting accuracy, service, or compliance.
How Advanced Portfolio Accounting Improves Operations
The ability to have accurate books and records, as well as reports that go out quickly to clients regardless of portfolio volume, is the main benefit any investment firm wants from an advanced portfolio accounting system. Yet, it’s very hard to do this with legacy portfolio accounting systems that require manpower and workarounds. Additionally, firms that have to pull data from many systems and then piece it back together for reporting purposes are losing out over their competitors who have upgraded their portfolio accounting solutions. Advanced portfolio accounting systems have the promise to become even more efficient with the application of AI tools, significantly improving investment operations.
AI and machine learning algorithms process data more quickly and efficiently to improve key operational processes related to portfolio accounting, including custodial data reconciliation and spotting patterns involving exceptions, which can reduce the time spent making corrections. Operations professionals can benefit from these insights to deliver even more timely data and reports to internal stakeholders and external clients.
Compliance Gets a Boost from Advanced Portfolio Accounting
The second benefit falls under compliance. Compliance departments rely on timely and accurate data, which is the crucial output of all back-office tasks. Compliance activities can be hindered without effective portfolio accounting software. Additionally, growth in terms of more clients means more potential exposure in terms of compliance risk. Today’s modern solutions contemplate effective interaction with compliance throughout the portfolio accounting lifecycle.
Automated Performance and Attribution Reporting Enhance User and Client Satisfaction
A third benefit relates to improved performance and attribution reporting. Report production for these areas can often face delays based on a lack of timely data from a legacy portfolio accounting system. To avoid this scenario and build more end-user as well as client satisfaction, automated reporting within an advanced portfolio accounting solution is essential. With an automated platform, investment firms can develop and maintain client and internal statements more effectively and feed data to third-party attribution solutions or calculate them natively.
Adding Performance Analytics to Portfolio Accounting Provides Efficiency and Greater Insights
A final advantage of implementing an advanced portfolio accounting solution to consider is enhancing performance analytics for more granular data and further performance insights. Advanced portfolio accounting solutions should include a complete PBOR – Performance Book of Record. One example is benchmarking tools for transaction-based performance comparisons. An effective PBOR can cover any period of time with regard to the investment performance of portfolios at any level (i.e. asset class, issuer, sector, industry and security).
Leveraging Investment Portfolio Accounting Software for Growth
With all these benefits comes the ability to grow AUM. Investment portfolio accounting solutions with modern technology offer scalability and automation, which improves efficiency. Without robust, tech-forward software at the heart of back-office operations, growth is hard to achieve without increasing costs. Opportunities may fade if firms invest too much time and energy implementing workarounds for outdated technology that powers legacy portfolio accounting systems. Gaining benefits starts by selecting the right system for future growth.
Evaluate options based on the features and criteria defined above. Firms should also consider what the migration process will require and what the provider’s experience level is in implementing portfolio accounting software while offering ongoing support.
How Managed Outsourcing Services Provide a Multiplier Effect on Advanced Portfolio Accounting Solutions
Advanced portfolio accounting software becomes even more effective when firms partner with managed outsourcing services provided by the same vendor. Outsourcing drives significant value by partnering with experts to support:
- Reconciliation
- System Administration
- Back-office operational activities
- Other administrative tasks
The value of managed outsourcing services aligns nicely with growth initiatives surrounding portfolio accounting activities. When implemented, =firms can expect:
- Improved operational efficiency: Organizations can’t grow consistently without operational support and automation.
- Business processes and controls become stronger: Outsourcing can also play a role in strengthening operational processes and adding further controls. This improves the compliance standing of the investment firm overall.
- Cost savings: Firms can grow AUM without adding headcount. Outsourcing has always been a way to minimize operating costs. It helps firms reallocate cash flows towards growth initiatives.
- Less administrative strain: There’s considerable administrative work involved in the back office, which can be tedious and less strategic. By outsourcing, companies can shift towards high-impact and strategic initiatives.
Case Study: Boutique Investment Firm Streamlines Operations with Outsourcing
INDATA client Pier Capital sought a more integrated software solution for trading and reporting. INDATA’s portfolio accounting software and outsourcing services enabled the company to streamline operations. Additionally, they wanted to shift workloads so that their team could focus on core investment activities and client service.
Pier Capital was able to achieve these goals with the support of INDATA. Read the case study here.
The Future of Portfolio Accounting: Innovation and Growth
Portfolio accounting has evolved significantly, primarily due to technological advancements. There’s more innovation on the way, powered by AI. Predictive analytics surrounding back-office activities will become more reliable as machine learning models improve. More industry-specific data will be critical for this to occur.
Future enhancements in portfolio accounting will also involve more advanced features.
Achieve Portfolio Accounting Growth with INDATA
Partner with INDATA for best-of-breed portfolio accounting software and outsourcing services. The result is growth for the firm while minimizing administrative strains and achieving back-office operational efficiency.
Learn more by scheduling a demo.
