Consulting Conversation: Total Portfolio View

The total portfolio view trend is compelling because it provides investors with panoramic and actionable insights into their investment landscape. In an environment where complexity is the norm, this approach cuts through the noise, enabling a grasp on risk and performance that segmented views cannot deliver. It also caters to an urgent need for sophistication in analysis and decision-making.

In this Consulting Conversation, Arnie Wachs, Head of Consulting at Cutter Associates, sat down with Shankar Subramanian, Consulting Principal – Head of Public Funds and Compliance at Cutter, to discuss the topic of total portfolio view and how investment managers, especially asset owners, should be thinking about it.

‘Total Portfolio View’ Defined

The total portfolio view is a strategic approach in investment management that’s aimed at optimizing asset allocation and risk assessment across the entirety of an investor’s holdings. This is particularly important for asset owners who have investments across multiple asset classes. This methodology consolidates the analysis of all assets, regardless of type or storage location, into a single integrated perspective.

Key advantages include enhanced risk management, through an aggregated view of their holdings and exposures, and a holistic set of data and analytical framework for portfolio rebalancing and related tactical asset allocation decisions. Effective implementation of the total portfolio view requires advanced analytical tools and a commitment to ongoing portfolio evaluation, adapting to the evolving market landscape.

The Consulting Conversation

Arnie: Good morning, Shankar. Thanks for sitting down with me today to discuss this important topic. Let’s start with a big picture question: What’s the purpose of having a total portfolio view?

Shankar: It’s crucial in supporting investment decisions and service reporting for asset owners like pension funds or endowments that are invested in assets across multiple asset classes. Without it, they can’t make informed choices or report accurately.

Arnie: Right. However, gathering data from different asset classes must be challenging, especially with varying data granularities.

Shankar: Absolutely. It’s a common issue with mixed data from private and public markets, and it’s tough to correlate across asset classes.

Arnie: How do asset owners respond to market events or make tactical shifts in their portfolios?

Shankar: Asset owners are looking beyond traditional asset allocation. They want to be responsive and use tools like derivatives or ETFs for quick adjustments, typically using an overlay portfolio at the total portfolio level. When a set of market events requires changes to allocations across different asset classes or strategies, it’s time-consuming and expensive to move funds across entire sets of portfolios.

Arnie: And what about the data itself? How do they ensure it’s accurate and useful for investment decisions?

Shankar: It starts with robust data collection and management. Asset owners need to negotiate with general partners for private market asset-level data and establish clear contracts with third-party service providers for the content, frequency, and method of delivery of data.

Arnie: I see. So once they have the data, what’s next? How do they handle less frequent reporting from alternative asset classes?

Shankar: They have to rely on the latest valuations and make adjustments based on market movements, using global economic data and various indicators.

Arnie: And all this data is not just for investment decisions, right? Is it also for board reporting?

Shankar: Exactly. A total portfolio analysis is useful for board reporting. For example, if your board wants to know the exposure to a country that has suddenly been subject to political turmoil, you need a quick way to navigate across all the portfolios and asset classes that may be invested in assets involving that country. That said, however, the primary focus should be on supporting investment decisions.

Arnie: Thanks again for your time today. It all sounds like a lot of work. Is it worth it?

Shankar: Definitely. Having accurate data not only aids in investment decisions but also streamlines the full lifecycle of the investment process. It’s not easy, however ─ and that’s why clients hire firms like Cutter.

Interested in speaking with us about total portfolio view? Connect at [email protected] to learn more.