Sep 01, 2022

Today's performance management professionals have access to more sophisticated vendor solutions than ever before. However, large numbers of asset managers simply lack a robust performance tool, and therefore rely heavily on Excel for data sourcing, calculations, and reporting. Yet even asset managers using industry-leading commercial solutions augment their automated performance processes with one, two … or perhaps even five Excel spreadsheets.

Why is that? Let’s dig in.

Over the last 15 years, the capabilities of performance measurement tools have come a long way − spanning calculation methodologies, multi-asset coverage, performance attribution, composite functionality, and even workflow. Best-of-breed tools and adjacent technologies such as OMS have broadened their performance capabilities, and vendors are making a concerted effort to serve as the one-stop toolset for performance management professionals. However, the fancy software hasn’t broken firms’ addiction to Excel, and firms often still use Excel spreadsheets , at a minimum, for the last leg of the workflow.

Where is Excel still used?

I see firms using Excel in three areas: data preparation, reconciliation, and data visualization.

Firms employ spreadsheets to conduct data preparation tasks (e.g., staging) before security-level returns are sourced by the performance tool. Reconciliation is another area where Excel creeps into play for many asset managers. If a performance team needs to compare preliminary returns calculations against the custodian’s official performance, team members might use Excel to reconcile results. In other cases, firms use multiple tools to calculate performance returns and/or attribution that are either poorly integrated or not integrated at all, requiring them to utilize Excel to reconcile across platforms. While the hope is that account- and fund-level performance returns are being calculated and generated in a fit-for-purpose performance tool, Excel is often commonly used in the visualization of results.

It’s often easier to extract performance data and manipulate the output in Excel versus bending a performance tool to your will.

Excel allows users to tailor dynamic charting to their own preferences. A person with Asset Manager XYZ will have a preferred view of the performance results, which may differ from how others across the firm want to see it. Many performance management professionals extract returns data from the performance tool and manipulate it in a spreadsheet before presenting it to the firm’s portfolio managers. Sometimes BI tools like Tableau and Microsoft Power BI are layered on top.

What features do vendors provide?

Many of the commercially available performance tools today have performance and attribution capabilities that cover multiple public and private asset classes, including derivatives. Several solutions feature an intuitive dashboard builder that allows users to build their preferred visualization and dig in to slice and dice performance returns to tell a story. Multiple vendors are working on developing new competencies around visualizing performance results.

How should you combat your firm’s Excel addiction?

Here are four ideas:

  • Advocate: Identify system gaps and raise enhancement suggestions to the vendor. We all know vendors could benefit from expanding their dashboarding and drill-through capabilities. Improved workflow engines with robust exception management and approval logic would improve matters.
  • Cross-train: Identify and encourage training and cross-training opportunities for staff to enhance their understanding of the performance tool.
  • Network: Attend vendor- or peer-sponsored user groups to learn more about how others are adapting their firms’ workflows to fully utilize the system.
  • Consolidate: Get out of the data reconciliation business by considering the consolidation of performance applications.

Although these steps might help with certain aspects of the “overreliance issue,” Excel as a tool unfortunately is not going away anytime soon. Excel will remain the universal language of asset managers – and other industries – for a very long time.

Remember, though, that the first step in treating an addiction is admitting you have a problem.

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