Types of investment reports
Client reporting
The quality of client investment reports plays a vital role in both attracting and retaining clients.
Before subscribing to a fund, allocators will want a clear overview of the investment objective, the risk level, costs, past performance and holding details. Much of this information can be found in an investment factsheet.
Once invested in a fund, allocators will then want a clear overview of the performance of the fund at regular intervals, with insights into what the contributing factors have been to overall investment performance.
The transparent way to retain capital
Client reporting can be an opportunity for the investment manager to present positive returns, but when investments have not performed as planned; transparent reporting can go a long way to alleviating client concerns, enabling managers to highlight evidence that any underperformance will be temporary.
Client reporting can also give UHNW families a holistic view of their wealth whilst gaining an insight into how their allocation of assets is performing and their overall returns, whether that be traditional equities, alternative investments, or non-bankable assets.
Performance reporting
Performance reports give investors and advisers the information they need to make well-informed decisions about whether a fund’s risk vs reward relationships are appropriate to their specific needs. The best performance reports give up-to-date information about fund performance in a consistent, accessible, and understandable manner.
A typical investment performance report should clearly present the performance of the entity vs the designated benchmark against given time intervals (MTD, QTD, YTD), in addition to calculation of the risk-adjusted return.
Risk reporting
Regulatory obligations have increased exponentially in recent years and now asset managers are expected to measure and report on risk in much more detail to both clients and regulators. Examples include: VaR, stress testing and liquidity, scenario analysis, and exposure.
Regulatory reporting
Investment firms are required to submit information to the regulator to show compliance with certain regulations. As time has gone on, the level of reporting and data these regulators require has increased and firms burdened with legacy systems and limited resources often find it challenging to meet their obligations.
The frequency at which firms needs to send the data differs between regulation, but there is one constant: the need to find a more efficient way to produce these reports.
To date, there has been a reluctance to pour resources into making regulatory reporting more efficient due to a perceived lack of ROI. But with the demands of regulators unlikely to decrease, saving time by automating this process is something investment managers are having to get on board with. Examples of regulatory regimes include:
- UCITS
- AIFMD
- MiFID
- EMIR
ESG reporting
In recent years, there has been an explosion in investment in ESG (Environmental, Social, Governance) assets. However, with this growth has come significant data and reporting challenges. The complexity and costs of ESG implementation have risen, and allocators have begun to ask more challenging questions.
As ESG investing continues to grow in popularity, regulators globally are being forced to introduce new provisions to ensure the safeguarding of clients and prevent greenwashing. New regulations in Europe, such as the SFDR, have created completely new requirements but have already significantly improved the standardisation of reporting.
