Barra has launched what it describes as the first product to make investment performance analysis based on daily data practical for even the largest fund managers.
Barra Enterprise Performance aims to give fund managers accurate daily performance attribution analysis and reporting that complies with industry standards such as the Global Investment Performance Standards (GIPS). The new tool will complement Barra’s existing Aegis Performance Analyst product, which attributes equity performance to various risk factors, by analysing investment performance for multi-asset class portfolios along user-defined dimensions (so-called “asset buckets”) and at the level of individual securities.
It is widely recognised that measuring and attributing investment performance is now seriously problematic. With portfolios in constant flux as assets are bought and sold, they form a ‘moving target’ that is hard to measure. Barras says that, as a result, the monthly reports which investors demand typically have a margin of error approaching 100 per cent of the active return amount – yet this is the figure by which investment managers’ performance is often judged.
The solution to this (as recognized by AIMR’s GIPS) is basing performance reports on figures generated daily. Until now, says Barra, no packaged software has been designed to handle measurement using daily valuation – instead, asset managers were faced with the nightmare of trying to build their own version to cope with 20-30 times more data, or just put up with the inaccuracies of monthly-based measurement.
Barra Enterprise Performance – the result of Barra’s acquisition of the Australian company, Investment Performance Objects, in December 2002 – aims to address this problem. Although fund managers recognize that daily valuation leads to more accurate performance analysis, using daily data has proved impractical for most firms using existing tools because the enormous data requirement of daily valuation – 20 to 30 times that of monthly valuations- slows down the reporting cycle.
Barra says its new tool accelerates data processing and report generation.
“We are particularly impressed with the speed of Barra Enterprise Performance,” says Piers Alsey, head of performance measurement at First State Investments in the UK, one of several companies currently using the software. “Attribution reports can be produced on request; even a global report with over 2000 securities against indices can be completed in seconds. Given the real-time responsiveness of Barra Enterprise Performance, we can focus on key periods and quickly identify the drivers behind performance.”