Investment Process Monitoring, Management & Imrovement
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Managing, Monitoring, Measuring & ReportingThis includes the ongoing tasks of general investment management, compliance, accounting, and client & regulatory reporting. Specific tasks that must be incorporated include:
Portfolio analysis
Risk management
Portfolio rebalancing, management, accounting & reporting
Performance attribution and measurement
Trade performance measurement
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Investment Process Improvement
The evaluation phase is ongoing, always reviewing the process to achieve continuous improvement. Observe, measure and improve, as in a manufacturing process.
Some characteristics and functions to focus on are:
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Automate all tasks as possible
- Define success of process; implement validation criteria
- Install and monitor diagnostics; is there a problem, is the process broken, where?
- Smooth transitions between phases; minimize slippage and loss of alpha
- Decentralize silos of knowledge and expertise
- Review all characteristics, measurement data
- Optimize hardware, software & telecommunication configurations
- Maximize data efficiencies: logical, definitional, subject matter, architectural, structural, schema
- Research: model validation, back testing; standardize (z-scores, Winsorization, factor compatibility, reusability, etc); control bias (survivorship, look ahead, etc)
- Integrate performance attribution insights into portfolio construction and optimization processes
- Portfolio construction: cost of constraints, turnover, transfer coefficient, alpha decay, validity of forecasts and risk measures; super efficient beta management; original alpha creation techniques
- Trade performance: market impact, commission usage; VWAP, Implementation Shortfall, Arrival Price, etc
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Management review: true to objectives, client mandates, prospectus; justification of fees
Repeat and incrementally improve the technology-based investment process
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