The Missing Link: Operations Improvements
The Missing Link: Operations Improvements
Enhance Portfolio Performance
No. 1 in a Series
Chandresh Iyer
Head of Global Custody and Investment Services
Citi
Chito Jovellanos
President & CEO forward look, inc.
The coming decade will be a difficult one for institutional asset management. A vastly more crowded market for investment and trading ideas, more constraints on leverage, demands for greater transparency, changing compliance rules and more risk-averse investors will ensure that the heady days of relatively easy alpha and benchmark-beating strategies will be much harder to sustain.
Will this be the “new normal”? The
This definitive analysis demonstrates
emerging consensus is best expressed
how improved investment operations
by Blackstone Group cofounder
contribute anywhere from 50 to
Pete Peterson (in a December 2009
250 basis points (bps) in realized
McKinsey interview), who sees “the
portfolio performance. Moreover,
center of gravity of the business
we show the relative contributions
shifting from financial engineering
of each of a number of components
to operational improvements.”
of investment operations to overall performance alpha, and discuss
A 360o View of
Operational Quality
Andre Perold’s seminal work related to implementation shortfalls
(“The Implementation Shortfall:
Paper Versus Reality,” Journal of
Portfolio Management, 14(1): 4-9,
1988), coupled with more recent work by Ananth Madhavan while
Citi Investor Services has been at
how investment managers can best
the nexus of investment operations
improve their operational capabilities
for several decades. In our ongoing
in support of alpha enhancement,
dialogues with investment managers,
regardless of the company’s operating
firms have consistently expressed
model — be they traditional 40 Act
the need to better understand how
complexes, retail SMA managers,
operational efficiency
Enhance Portfolio Performance
No. 1 in a Series
Chandresh Iyer
Head of Global Custody and Investment Services
Citi
Chito Jovellanos
President & CEO forward look, inc.
The coming decade will be a difficult one for institutional asset management. A vastly more crowded market for investment and trading ideas, more constraints on leverage, demands for greater transparency, changing compliance rules and more risk-averse investors will ensure that the heady days of relatively easy alpha and benchmark-beating strategies will be much harder to sustain.
Will this be the “new normal”? The
This definitive analysis demonstrates
emerging consensus is best expressed
how improved investment operations
by Blackstone Group cofounder
contribute anywhere from 50 to
Pete Peterson (in a December 2009
250 basis points (bps) in realized
McKinsey interview), who sees “the
portfolio performance. Moreover,
center of gravity of the business
we show the relative contributions
shifting from financial engineering
of each of a number of components
to operational improvements.”
of investment operations to overall performance alpha, and discuss
A 360o View of
Operational Quality
Andre Perold’s seminal work related to implementation shortfalls
(“The Implementation Shortfall:
Paper Versus Reality,” Journal of
Portfolio Management, 14(1): 4-9,
1988), coupled with more recent work by Ananth Madhavan while
Citi Investor Services has been at
how investment managers can best
the nexus of investment operations
improve their operational capabilities
for several decades. In our ongoing
in support of alpha enhancement,
dialogues with investment managers,
regardless of the company’s operating
firms have consistently expressed
model — be they traditional 40 Act
the need to better understand how
complexes, retail SMA managers,
operational efficiency