In recent years, the use of managed investments in trusts has grown significantly. This has put the onus on trustees to regularly review these investments and scrutinise their corresponding fund managers, alongside the management of private assets such as property, yachts, and collectibles.Although asset management will always remain outsourced, trustees need to know, and be able to report on, the asset classes and geographic regions to which the trust is exposed, as well as the liquidity of the assets. This is particularly important if the trust makes capital distributions or pays out an income.
This generates vast data requirements, under which legacy systems start to strain. However, more advanced software is now enabling trustees to reduce reliance on burdensome spreadsheets and all but eliminate manual processes when it comes to data management and reporting. Dedicated trust reporting platforms can automatically source and process vast amounts of data and present it in customisable, visually compelling dashboards for faster and more effective portfolio monitoring.
But what are the underlying data challenges fuelling this technological shift?
1. Stepping up portfolio monitoring
A key driver of trustees getting to grips with data management is the need to have ready access to up-to-date portfolio performance data for effective investment monitoring. Most trustees review investment performance quarterly, but with volatile markets and an uncertain economic outlook, there is now an expectation that this will be carried out more frequently.
Once trustees have drafted investment policy statements (IPS), assessed client tolerance to risk and created target asset allocations, it also falls to them to monitor the data needed to stay within any agreed limits and investment scope.
If trustees receive portfolio data that is refreshed daily, this can feed an alerts system that ensures they are able to quickly identify and rectify any breached IPS limits, in addition to performing any portfolio rebalancing where necessary. Such an agile view can also enable trustees to better manage cash and liquidity in line with client preferences.
And it’s not just investment monitoring that data underpins. Recently, there has been much greater scrutiny on the fees trustees are charged by their investment managers. A system that is updated automatically on a daily basis gives trustees much greater visibility of outgoing fees, so they can make more informed decisions about manager selection against their performance.
2. Enhancing risk management processes
In line with increased monitoring of investments, trustees are beginning to take a much more proactive approach to risk management. However, the data that they receive from fund managers often does not provide them with an adequate understanding of a client’s aggregate exposure to risk. And with specialised risk personnel and sophisticated risk systems coming at a premium, trustees often lack the resources and operational capacity to perform comprehensive risk analysis and monitor risk across all asset classes.
Recognising the importance of data and robust risk analysis to developing risk capabilities, trustees are increasingly turning to software that enables them to monitor investment risk and exposures, in addition to measuring potential liquidity risk that could emerge under various economic scenarios.
3. Consolidating public and private asset data
Ultra-high-net-worth (UHNW) clients these days have incredibly diverse portfolios. Allocations to real estate and private equity have surged in popularity in recent years. And other alternative investments including hedge funds, cryptocurrency and passion assets such as art, vehicles and wine are growing. As performance and valuation data for almost all private assets is sourced from multiple systems, spreadsheets and statements, bringing this data together for portfolio monitoring and consolidated reporting is made even more difficult and time consuming.
Currently, most trustees have to source this data manually and consolidate it in spreadsheets. Having communicated with multiple relationship managers and logged into multiple banking portals to get all the necessary data, it is often no longer completely up to date by the time it is used for portfolio management decisions and reporting. Partnering with a provider that can handle all of these data pipelines alleviates much of the burden for trustees and allows them to focus on what matters.
4. Keeping client data safe
UHNW clients place a significant premium on their personal privacy, meaning trustees have a responsibility to not only protect their clients’ assets, but also to keep their confidential information safe. And given the vast amount of wealth trustees look after, they are an increasingly popular target for cyber-attacks.
To counteract the rising threat and ensure data is best protected from cyber-attack, trustees are entrusting their data to the cloud, instead of the server-based systems and hard copies of old. Cloud-based software solutions employ security measures beyond the affordability of most businesses. Sophisticated detection systems, strong authentication, and encryption techniques to protect user data are standard.
Unlocking The Power of Your Data
With up-to-date and consolidated data, trustees can make swift, informed investment decisions and significantly upgrade their risk management capabilities. They can also improve their investment monitoring processes, to facilitate more comprehensive periodic performance reviews. With the right trust reporting software, trustees can all but eliminate repetitive data management tasks, reclaiming time for value-add activities, such as relationship building and business development.
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