Attribution: Can New Technology Close the Gap?

Julie Snogren

Director, Consulting

Julie Snogren joined Cutter in 2021 and bring extensive expertise in performance and attribution - from oversight, calculations, monitoring, and managing the regulatory environment to automation of reporting and customizing reports for complex portfolios. Her experience includes deep dives into investment approaches that explain manager decisions that drive investment results. She has worked with equity, fixed income, multi-asset investment, and alternative portfolios, providing a solid understanding of the fundamental drivers of returns across a range of markets.

Julie’s experience in various roles also involved substantial emphasis on independent research, and the creation of communication materials and presentations. In Julie’s most recent role as Vice President, Global Performance Measurement, at Brown Brothers Harriman, she led a team of analysts that supported the global client base for all performance and attribution needs. She worked on various products across the fund range, including 40 Act, ETFs, UCITS, institutional/separate accounts, and alternative portfolios. Her accomplishments in this role included initiating and leading RFPs, resulting in the implementation of SS&C’s Sylvan Application. Other successes in this role included product roadmap enhancements and efficiencies to the workflow that increased current client adoption of performance services from 14% to 40% and increased new client onboarding by 68%.

Prior to her role at Brown Brothers Harriman, Julie spent 12 years in various roles at Oppenheimer Funds, where she led the Performance Measurement team. She ran the production of alternative product financial statements, utilizing GAAP, FASB, GASB, and Insurance accounting standards inclusive of the audit coordination/completion. Julie also spent time in several analyst roles in fund accounting, which gave her the opportunity to be the lead on multiple high-profile projects, involving the creation of GIPS requirements, designing the accounting workflow for newly acquired institutional products, and the successful start-up of several commercial paper conduit portfolios.

Julie holds a bachelor of science in accounting from Columbia College and a Graduate Certificate of Advanced Study in Management from Northeastern University.

Andrew Jenkins

Director, Consulting

Andrew Jenkins brings more than 20 years of experience in buy-side financial services, with a focus on project management in the areas of performance measurement and attribution, portfolio analytics, GIPS compliance, risk management, and data management. At Cutter Associates, Andrew works in the firm’s Strategy & Data Management and Performance Measurement practices.

Andrew is a thought leader on performance measurement business practices and GIPS compliance, regularly speaking on the topics at industry conferences. Andrew has a deep understanding of asset management operational and technology processes, and has successfully managed several large-scale operational and systems integration projects throughout his career, including data warehouses, performance measurement and attribution systems, web-integration services, and the acquisition and implementation of a client reporting service. He is active in multiple industry groups in the areas of performance measurement and risk and in board-related forums.

Prior to joining Cutter, Andrew was a director at Charles Schwab Investment Management, where he oversaw performance measurement and attribution, risk, client reporting, and competitive research. He previously worked in the Board Analysis Services Group at Lipper Analytical (now Thomson Reuters). Andrew holds a bachelor of arts in economics from the University of Colorado.

Jul 18, 2023

With performance measurement rapidly evolving , today’s performance analyst faces a difficult task. The technology should lend a hand, but instead we find many firms struggling with challenges that stem from reconciliation of their results among different tools.

In fact, according to our 2020 research report on the topic, 62% of surveyed Cutter member firms continue to use two or more systems to support their performance measurement and attribution.

Not long ago, investment managers were left with no other choice. With an immature technology provider landscape, taking a best-of-breed approach was the only option to meet the requirements of the performance and front-office teams.

But that time has now passed, the technology landscape has changed, and vendors have developed more complete solutions. Multiple systems make it difficult to maintain data integrity, rationalize calculations, and ultimately meet increasing client demands.

Now’s time for firms to work on closing the gap.

Attribution Challenges

Performance attribution is typically built to serve two constituencies ─ portfolio managers and clients. But attribution calculations and results have often not been the same. At many firms, this continues to be the case. In some circumstances, this is intentional. Client reporting requirements may necessitate a different computation compared with the front-office view. For instance, the dispersion of results could come from the differing books of record that are sourced by the back, middle, and front office (ABOR versus IBOR).

Differences could also stem from custom client-specific sector or country classification schemas, which can affect the composition of the benchmark. But other times, it’s not intentional, and these differences arise with the use of multiple systems, although ultimately for the same purpose. It is here where our industry needs to close the gap ─ and firms now can seize the opportunity.

Technology Providers Rise to the Occasion

Attribution technology providers have responded to this need. They’re providing increased functionality (multiple methodologies) and the ability to load third-party models. This includes reconciliations, workflows, and user interfaces that appeal to both the front-office and client reporting teams. In addition, many attribution tools have moved to a cloud infrastructure, allowing for more frequent updates and enhancements and alleviating much (but not all) of the need for IT resources. This increase in capabilities is also fostering improved operational efficiencies by enabling attribution and performance to be performed on the same underlying data, reducing the headaches associated with reconciling across various platforms.

Consolidation Has Led to Simplification

Consolidation in other areas of investment management has also affected how (and what) attribution systems providers are considering. Attribution technology providers have responded by acquiring functionality, leading to a consolidation wave initiated after Bloomberg acquired Barclays indices and the Point attribution tool. As many front-office systems were no longer free to use, firms were forced to reassess their attribution tools to reduce costs. Since then, FactSet acquired BISAM’s B-One product and Confluence purchased StatPro Revolution. These acquisitions filled gaps in the acquiring firm’s offering ─ strengthening their GIPS capabilities, enhancing fixed income attribution, and expanding attribution methodology options. These technology providers are attempting to bridge the gap between the front and middle offices, while offering consistency to their client service organizations.

Firms have responded in kind and continued to examine these “suite” performance and attribution systems as replacements for their best-of-breed tools that are usually selected by their respective owners, whether portfolio management, client reporting, or performance teams. These consolidation efforts began with the introduction of the Eagle Performance suite of tools, as competitors sought to match its capabilities and provide a compelling alternative.

There was a time when specific use cases warranted separate attribution systems. The landscape was immature and front-office attribution systems were free and cost was not a focus. However, as time has passed, the possibility of consolidation presents numerous benefits to asset managers and asset owners. Not only can attribution calculations and results converge into a single frame of reference, but a firm’s other redundant computations and workflows also can be minimized.

Attribution: What’s Next?

As market expectations and requirements have evolved alongside technology, firms today want to simplify their performance and attribution validation processes and achieve consistency in their attribution results. Technology providers have stepped up, continuing to develop their tools, now that revenue is available to drive the development. That said, some specialized asset classes and models still require niche attribution solutions.

Will we see the day when firms get a single attribution tool that can handle all their attribution needs? We don’t know, but we sure hope so.

Interested in creating a Performance Measurement Center of Excellence (CoE)? Check out the benefits and challenges.