Interview with Tyler Kim – Historically, risk reporting solutions were developed to cater to the needs of sophisticated portfolio managers that require a broad array of data-intensive reports with which they could evaluate the performance of their trading strategies.
However, with investors, fiduciaries and other stakeholders now taking an interest in understanding portfolio risk, today’s approach to risk reporting must adapt to ensure relevancy to a broader audience.
“These days, ‘less is more’ in risk reporting,” points out Tyler Kim (pictured), CIO at Maples Fund Services. “Our clients are asking for a smaller set of reports that they can actually understand, as opposed to a large set that they’ll never look at.”
“Risk management software solution providers that try to be all things to all people are facing an uphill battle,” says Kim. “The audiences for risk reporting are becoming increasingly diverse. Each client has its own nomenclature and investment philosophy. To be of value, their reporting systems need to reflect that.”
Kim believes that a bespoke approach to risk reporting is the answer that many institutional investors and investment teams are looking for. Rather than focusing on the development of a single software solution that tries to anticipate all the functionality that clients may need, Maples Fund Services takes a collaborative approach that offers clients the skills of their consulting professionals and software developers to design and build individualised on-line dashboards, data aggregation solutions and risk reports.
“People looking at portfolio risk reports want to feel like instant experts in what’s happening, not confused by what they’re looking at. If the end users of the data contribute to the design of a report, it becomes a lot easier for them to relate to,” says Kim.
Maples Fund Services’ technology solutions are augmented by a global team of middle-office and accounting professionals in Hong Kong, Dublin and Montreal that work across time zones to perform the data management necessary to produce reports on a timely basis. “Timeliness in risk reporting is critically important,” stresses Kim. “It’s less valuable to know something after it’s too late to do anything about it.”
In addition to data loading, augmentation and reconciliation, Maples Fund Services middle-office staff summarise the observations gained while compiling reports and working with the data, providing an independent set of insights about portfolio activity for their clients. Such insights can help to enhance portfolio oversight in areas such as strategy drift and mandate compliance.
“While reviewing the top positions contributing to a client’s managed accounts program’s gains, one of our analysts noted that one manager had done particularly well on a short of the Egyptian pound,” recalls Kim. “In this instance that manager was hired for their expertise in equities, not currency trading. It created the opportunity for some interesting dialogue with that manager.”
The provision of enhanced reporting to both managers and investors is a logical extension of the fund administration services that Maples has traditionally provided. New capabilities that Maples needed to develop for risk reporting included the ability to consolidate data across multiple portfolio and/or funds, and combine information from disparate data sources such as administrators, custodians, prime brokers and market data vendors.
For administrators like Maples, risk reporting is representing a new opportunity for business growth through concentric diversification. “In addition to providing us with a new service that we can offer to existing fund manager clients, consolidated risk reporting has opened up the institutional investors themselves as a new client base for us.”