Corporate treasurers measuring the performance of their investment managers can rely on managers' self-evaluations--rife with conflict--or collect and reconcile the investment-related data themselves to measure against standard benchmarks.
The latter option is a lot of work. So Clearwater Analytics, prompted by its longtime customer Cisco Systems, significantly upgraded its operating fund analytics technology this year to provide customers with a software-as-a-service (SaaS) solution to monitor their asset managers. Since the technology giant's managers each used their own benchmarks and metrics to report their performances, Cisco's treasury staff was uncomfortable comparing them.
"Cisco wanted a standard measurement stick for performance that included a selection of several indices," says Courtlandt Gates, CEO of Clearwater.
Cisco had considered building the system using off-the-shelf software, but that would have required making hardware and software changes and training staff. Clearwater's SaaS offering, now available to all of its clients, requires only minimal staff training.
Clearwater was already aggregating and reconciling most clients' investment-related data for accounting and risk purposes. The Boise, Idaho-based technology firm's upgrade introduced index benchmarks--from Barclays, Merrill Lynch and Lipper--that clients choose when they open their accounts to measure the performance of their various asset managers against.
The new Clearwater technology, typically providing next-day information, enables treasurers to monitor the performance of portfolios from a summary level as well as by sector and even down to the individual securities.
"A treasurer can tell his investment managers he'll be measuring them against specific benchmarks, and he'll be able to compare their performances," Gates says, noting the difference from the benchmark represents the success of the manager's opinions. "The manager may own fewer financial securities or more longer maturities, for example, compared to the benchmark, so that comparison is very meaningful," he says.
Also new are screens allowing clients to measure their portfolios' performance by sector, duration, credit rating, security type, market capitalization and country.
"This gives our clients the ability to have a very intelligent conversation with their investment managers, rather than spending time doing the backbreaking data work," Gates says.