Portfolio Commentary: Why the Top Asset Management Firms Automate

March 11, 2016 Flynn Murphy

Asset Management Reporting

Asset management firms are consistently faced with the challenge of how to communicate investment performance, across a variety of funds, to a wide array of clients. These firms pool their investors’ hard-earned dollars into portfolios, invest the portfolios in securities, and seek to earn a satisfactory return.

To accomplish the task, asset managers offer differing investment products and portfolios, ranging from small-cap value stocks to global bonds. Their clients differ too. They oversee the funds for working men and women, retired couples, large institutions, and more.

While communicating with such a diverse range of folks presents unique challenges, both internally and externally, it is also an opportunity to improve an important process: portfolio commentary.

Personalized reports is a challenge

Portfolio managers are tasked with describing their portfolio’s performance to multiple audiences -- sometimes without knowing the intended audience. Effective commentary varies in tone, length, and incorporates different data depending on the end audience.

For example, a retail investor wants to understand their overall gains or losses at a fairly high level, a financial advisor who invests in the fund wants to be equipped with enough information to satisfy her clients, and an institutional investor wants to understand deeper performance attribution metrics. This is quite a range of audiences.

Delivering accurate reports is a challenge

Commentaries go through numerous rounds of feedback and review. Portfolio managers and trusted analysts will draft initial comments. Marketing teams and investment writers will touch up the documents, adding rhetorical flourishes when the opportunity arises. Copy editors and compliance personnel may further amend the text to meet regulatory standards. Unfortunately, there’s ample opportunity for human error to present itself in this process.

Delivering reports with a consistent brand voice is a challenge

Commentary writers have different styles. Some are a bit Hemingway (“Investment results were good.”) while others tend towards James Joyce (“The portfolio’s returns were strong and respectable, though still more spaces of opportunity arose during the period while the somber façade of market disruption loomed and the Fed’s policy decisions lingered.”). 

As an asset manager, whether from a boutique shop to a global firm, you are required to use a house “voice” or, in other words, firms require a standardized caliber of commentary across all investment products. This can be tough as portfolio managers span both the globe and the writing style spectrum.

Delivering reports quickly is a challenge

Along with regular, monthly, and quarterly performance reports, asset managers are tasked with writing portfolio performance commentaries on an ad hoc basis. This ranges from producing intra-quarter documents for sales, internal wholesalers, and RFP teams to giving updates to institutional clients.

In addition, the standard timeline for writing quarterly commentaries has compressed from roughly one month after a quarter to, at times, mere days after a quarter ends.

Delivering reports for SMA stakeholders at high-scale is a challenge

In addition to exchange traded funds and mutual fund products, many asset managers run a wide array of separately managed account (SMA) strategies. While these separate accounts are typically run by the same teams supporting the public fund offerings, and investment results may be broadly similar, the specific results and reporting needs behind SMAs differ in meaningful ways.

The Value of Automating Portfolio Commentary

The range of challenges is varied, however, and new technologies such as Advanced natural language generation (Advanced NLG) have emerged that can help. In fact, 9 of the top 25 asset management firms use our Advanced NLG platform, Quill, to help automate their portfolio commentary as it enables:

  • Personalization: Advanced NLG allows users to toggle language variability around the same set of basic facts. For example, the same set of portfolio returns data can be used to generate a paragraph of plainspoken text for retail investors or a list of bullet points for institutional investors.

  • Accuracy: Advanced NLG consistently and accurately writes about all the key drivers of portfolio performance—and does so in an unbiased fashion.

  • Consistency: Advanced NLG can be customized to incorporate asset-manager-specific vocabulary and phrasing to describe certain outcomes.

  • Speed to Market: Advanced NLG can deliver institutional-caliber commentaries in a matter of seconds.

  • Unlimited Scale: Once Advanced NLG systems understand an asset manager’s reporting needs, it can rapidly scale to produce commentaries for both high-visibility publicly-traded products as well as SMAs.

To learn more about how Quill can help automate your portfolio commentary process, request a demo today.

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