Oct 05, 2021

Life is full of challenges ─ and, as it turns out, so is writing commentary for client reports. There are no easy answers in the world of commentary production, only trade-offs.

In this article I lay out some of the common challenges that we hear from investment management firms and provide perspective on the pros and cons of the available options.

Challenge #1: Commentary Time Constraints

The first challenge is recognizing that commentary is a time-bound effort. While technology strongly supports creating tables, charts, and graphics from structured data (e.g., performance data, attribution data), commentary requires significantly more human effort to produce. Therefore, commentary is often the component that holds up the distribution of client reports.

Firms able to produce commentary quickly seek to streamline the process as much as possible – they establish a well-defined process for gathering, reviewing, editing, and approving commentary. Conversely, firms that have many dependencies in the commentary process usually generate commentary at a slower pace.

Ultimately, speed is an essential factor. All other challenges are driven by the need to streamline commentary production efforts.

Challenge #2: What Type of Commentary to Write

With so many different types of commentary, writers can often get confused about what type to write and “what goes where.” Let’s break things down.

Looking Backward

Review commentary explains the past across several vectors, including market, asset class, portfolio performance, and portfolio attribution. Review commentary gives firms an opportunity to provide context and tell a story about how investments performed, typically related to an appropriate benchmark. Firms provide review commentary to demonstrate consistency with their investment philosophy and process. It reminds investors why they invested with the firm in the first place and gives them confidence that their assets are in good hands.

Looking Forward

Outlook commentary is all about forecasting. These commentaries make predictions on how the economy, monetary policies, and other external factors may impact client investments. Firms use outlook commentary to provide investors with insights into how the investment is taking exposures and managing risks to protect and grow assets. The underlying motivation aims to give investors confidence that the firm won’t be caught off guard and can deliver expected results, whether it’s asset accumulation or wealth preservation.

Challenge #3: Who Should Write Commentary?

The next challenge is to decide who is the best individual to write the commentary. The table below outlines the individual roles that are often asked to write commentary – however, there is no single answer. Each type of role adds something unique to the commentary. For example, a portfolio manager might have deep investing knowledge, but may not be the greatest writer. The best option will be different for different firms.

In reviewing the types of commentary above, firms may find that some roles are better suited to write a specific type of commentary than others. Firms might also use a hybrid model ─ for example, a portfolio manager may provide highlights and information to an investment or freelance writer who will create the commentary. A hybrid strategy that eventually results in a single editing voice allows the commentary to speak in a single voice/tone in accordance with a firm’s brand guidelines.

Challenge #4: Approval Process for Commentary

Now that the commentary is written, the next challenge is to get it approved for use. Without a proper workflow tool, firms are left to use tools like email and tracking changes in Microsoft Word to ferry commentary through the approval process. Thankfully, better options are available. Tools to help with tracking approvals can either be embedded in a client reporting tool or come through a workflow tool. The tools provide the ability to edit text, leave comments, and secure approval for the final commentary by those with authority.

Challenge #5: Where to Store Commentary

With the commentary written and approved, the last challenge is to find a place to store it. While firms may default to saving commentary on a file share or similar, they should consider the benefits of using other tools like a reporting tool or content management system (CMS). Using a static file share often requires manual copying/pasting from files and does not provide business rules to prevent users from using expired commentary. Client reporting tools can be used to store commentary and this makes sense because these tools have workflow and storage capabilities. However, getting commentary out of the client reporting tool for use in other systems may not be so straightforward. Alternatively, the approval process within a CMS tool can be used; however, it can incur additional licensing fees and integration headaches.

Commentary is only one of the key components in a client report. To help firms understand the strengths and weaknesses of their client reports, Cutter Associates now provides a Client Reporting Assessment service. The assessment evaluates your client reports and compares your reports against the industry and best practices.

For more information, or to discuss starting your assessment, contact us at [email protected].