Portfolio Management Software (PMS) for asset managers & asset owners [features & selection advice]

I've created this guide because it's a resource that I wish I had when I was on the buy side. Selecting Systems it's my hope that when you watch this video, you'll walk away with a few surprising, possibly takeaways that you can take with you when selecting systems. Why Cost matters, but not in the way you thought it did why Workflow efficiency for end users is the most important thing to evaluate when comparing systems. How a different approach to connectivity and integrations can significantly increase the flexibility of your business and in the process reduce costs. A portfolio management system is one of the most confusing terms within this industry because it can actually mean two things even within the industry. It can mean a back office system to set nav, et cetera, which is the interpretation that is used mostly within the hedge fund part of the industry. And it can mean a system used for the front office, which is usually how the term is used for an asset manager. We're going to focus on the latter in this video and that's what I'll walk through next. I'm Christopher Furst. I'm the CEO and co founder of Limina, a software company that services asset managers, asset owners and hedge funds. My background is from the front office and operations and bridging the two roles. And I'm now in a very fortunate position where I've been on the buy side in your shoes and transitioned over to a software provider. So I know what it's like to be a client of systems. I know what it's like to compare and evaluate systems and select them and I can now give back the resources that I wish I had when I was in your shoes. The primary end user is the portfolio managers or investment managers. Sometimes the traders or dealers might also be end users, in which case they typically log into the system and decide what to do with orders from there, where to route them off to. And then that could sometimes be a separate system like an ems and then they continue their workflow there. Compliance, if pre trade compliance is a part of the solution, is also a stakeholder. They're involved in setting up initial rules, but then they're not daily users of the system logging in. It's notification driven. So if something happens on a compliance rule then they're notified and they're logging in, which hopefully doesn't happen all that often. There are three functional capabilities of a portfolio management system. The first one is monitoring portfolios. That is in the form of a pivot table where you group on what you want and you select the columns that you want exposures, yield, duration, committed capital, etc. It could also be in the form of visualizations like dashboard widgets, etc. The second is simulating changes to portfolio. So what happens if we reallocate assets in a certain way, for example? And the third is actually making changes to the portfolio. So entering orders, rebalancing, having a leader, follower, recalibration, et cetera and limina is really, really strong on all of these three. We have the best position in cash engine, which is an ibor generation free. And that means you can simulate any change into the future, not just cash, but exposures. You can see that on a very sophisticated and detailed level, which is specifically useful if you invest in private markets, if you have fund of funds, or even if you have a discrepancy between the settlement days on listed instruments. It's worth also to note that the portfolio management system is usually a cross asset system, so all assets within the same solution. And the reason is that when you make these changes, you're usually affecting cash. And it doesn't make sense to make changes to subpart of the portfolio without seeing cash, which is extremely important to keep often to keep low. So you don't have a cash buffer, but also not get an overdraft. There's a clear trend in the market towards all in one solutions, or front to back solutions, or at least front to mid solutions away from best of breeding. The reason being it simplifies the operating model. You don't have multiple licenses to pay, you pay for one system instead of multiple integration headaches and costs are taken away. And what resides in these systems, the functional capabilities of these systems. It's not the secret sauce of an investment manager. These are things that are required to do from an operational point of view and from an investment process point of view. But it's not. The investment decisions aren't part of these systems. It just makes sense to streamline and increase efficiency which happens if you move towards the all in one away from best of breed. However, that's not the only question that drives efficiency here. There are other considerations as well. The core of any system is the engine that calculates position and cash. Any system that has position and cash in it has an engine that calculates positions and cash. And that is called an investment book of record. And there are three types of investment book of record. Number one is called the flush and fill, which isn't even really a book of record. It basically takes the positions and cash in the morning, start of day positions and cash from an accounting system or another provider and then makes adjustments intraday and then throws it away. So it's incredibly hard to do projections into the future and things like that, because what has been adjusted, what hasn't, et cetera. The second generation is called the rolling balance. It takes yesterday's nav and applies today's changes on top of it. So it sort of can stand on its own feet. It's not depending on a start of day load from another system. System, however, still is reliant and on this, that's just one time series, it's still making adjustments, etc. Third one is called a live extract IBOR and it creates the positioning cache view on the fly from all records that affect position and cache, historically, today and into the future. And having a system with a third generation IBOR means that you can very easily simulate any changes into the future. You can have portfolio managers, front office team members that are simulating things, even planning things that are weeks or months out. That doesn't affect reconciliations and other operational processes at all. They're sort of completely separated within the system. LIMNI is a third generation IBOR and all functional capabilities in the system leverages that engine and it can be managed internally or be fed from external middle and back office outsourcing providers. It doesn't matter, both are possible and the full value value of that engine is delivered to the front office. Workflow efficiency is probably the most important consideration when selecting a system, and this isn't caught in any functional mapping. So if you look at feature lists, do you have this yes, no type of questions, you're not going to catch the efficiency of the workflows. The average portfolio manager, when they go in to perform a workflow in LIMNA is actually less than 15 minutes per day, which is incredibly low compared to more than an hour in alternative systems. Which is because the way that we approach efficiency in workflows, making sure that portfolio manager sees only what they need at the time they need it and can perform workflows efficiently in the system, not relying on spreadsheets, even sophisticated workflows. Another important consideration when selecting a system is the ease of getting data in or out of the system. Most systems have what's called managed connectivity, which is when the vendor builds a connection and manages that on your behalf, which is a model that works very well for connectivity to execution systems, to brokers and to market data providers, for example, but it works less well for connectivity to reporting platforms from custodians and for example, administrators. Limana has taken a Different approach here we have developed an import and export application which is a user configurable tool that requires no code and no technical expertise, where users can build and maintain their own connections within minutes very easily in the system. And these connections are then monitored through dashboards and notifications. If something goes wrong, data is validated that is going in or coming out. And for example, if a file is delayed, you get that notification or you can see it in a dashboard immediately. It's important to consider buying a modern solution that has no IT footprint and no upgrades that you need to manage or test as a client. So cloud native solution with managed updates and regardless of your size, if you're a small hedge fund with 100 million in assets, or if you're a large international asset manager with tens or hundreds of billions, there are solutions cloud native available to support you. And the other part that's important of a modern solution is the user experience and user interface. We asked potential clients and end users to rate how intuitive and how easy do you think the liminal system would be to to use when you've seen demos and based on your experience with other systems. And the rating we got was not terrible, people guessed five on average, a little bit more out of 10. And when we then measured actual clients exactly the same questions when the users have been using the system for a while, the answer we got was 8.8 on average out of 10. So the difference there is massive. And I think it's a good idea to ask your potential providers for after usage, but at least they should be able to provide the satisfaction score of end users that are using the system. The pricing is to choose a vendor that is transparent with their pricing, ideally even publishing it on the website. And the reason why is that you want to know what the system costs before you spend time with the sales team. Because you might not even know if this is in the ballpark of your budget and things like this. The vendor knows what their system costs, so why would they not tell you? So the providers that do, it's a clear signal that they value a partnership with you as a client. They put your needs, your wishes ahead of their own concerns around competitive intel and things like this that comes with the fears of publishing prices on their website. Luminas pricing is available online. You can go through, you can go to our website and you'll find the pricing link which shows actual numbers. You can even get your own pricing quote there. One of the most difficult questions I get is what is limited ims? And the way I usually answer it is it is a all in one or front to navigate solution. Functional coverage is very broad combined with automation capabilities. This is delivered on top of a generation free investment book of record or a live extract book of record so you can simulate position and cash into the future, current and historical. And finally, it's a system with incredibly strong user experience and super efficient workflows powered by exception based workflows. Before using Lumina, clients have manual processes, some that they might not even be aware are possible to remove. They might not even think about them as manual processes managing data in Excel for example. They are sometimes unsure if they can trust the data that they see. Again, they might not even know that, but they realize afterwards that all right, I couldn't see these states in the front office, these simulations, these future scenarios on the portfolio. They found it sometimes difficult to scale and they had high key person risk which again they might not even appreciate before the exception based workflows come into play. After limina automation level is very high, again powered by exception based workflows. The source of truth is one single source of truth. So even if Lumina doesn't generate all non trading activities for example, we represent all of them and we give them to the front office users and operations to check and control. They have a very scalable model operating model in place that can scale to any asset class, any size of manager up and down. And finally key person risk is significantly reduced through the exception based workflows and the operations hub or processes are centrally controlled and monitored. Hopefully you've now got a deeper understanding of the nuances when selecting a system and that features and everything. Although there is a clear trend towards all in one systems, the other important consideration is exception based workflows or the efficiency of workflows which is often more impactful to your efficiency and your cost than the functional coverage of a system. If you have enjoyed this video, please subscribe to my YouTube channel where you get notified when I put out new videos. I'm active almost Every day on LinkedIn where I share information around operational efficiency, operating models, vendor selections, etc. Feel free to connect with me there or follow me. Thanks a lot for watching.