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Accurate & Consistent Reporting: Avoiding costly mistakes that can impact raising AUM

In an industry that relies heavily on data to support decision-making, accurate and consistent reporting in consultant databases is vital to investors and consultants when reviewing managers to hire. When things “don't add up” due to reporting discrepancies, it can impact managers screening into searches, getting hired for current mandates or shortlisted for future opportunities. Paying attention to details is paramount to telling a consistent and concise story that reflects the firm and its strategies.

Catching reporting errors immediately can mean the difference between winning a mandate and losing one. Firms are often constrained with limited time and resources, frequent shifts in personnel, or an unfamiliarity with the reporting requirements. Deadlines are missed, data is sparse and database profile completion rates are marginal at best. So how can managers do a better job and increase their opportunities to win new business and grow AUM?

One of the biggest issues we see is data that does not align with the source that it should be derived from. For example, when the representative portfolio uploaded by a manager does not match with the characteristics provided by the manager. We have seen instances where the number of holdings, cash levels, sector/market cap/country allocations and other important information is not indicative of the portfolio that was uploaded. Representative accounts do change, and a lack of communication around that change between teams responsible for reporting leads to these inaccuracies.

Understanding what the databases ask for in terms of strategy assets and composite assets and corresponding number of accounts is an area where we often see inaccuracies. While this may seem trivial, the difference between the numbers can be largely different. A manager may have a strategy with 20 accounts and due to guidelines, only 15 accounts fit the composite, yet managers are still reporting total strategy assets and accounts alongside performance. These inaccuracies become apparent when compared to what is being listed within GIPS verification letters and/or a manager’s marketing materials. Understanding where composite and strategy level data is required is significant for those reporting to understand.

Ever hear the term too many cooks in the kitchen? That applies to investment firms where we see various individuals reporting data without a consistent process. Whether the issue is with the turnover of staff who handle the data collection and reporting, or individuals who are unfamiliar with exactly what the databases are asking for, it often lends itself to inaccuracies. Most databases have online guidelines to navigate their platforms and definitions of what exactly they are asking for. Managers can easily access these online and should use them as a resource to ensure they are reporting information correctly. Universes classifications are defined by the consultants based on what managers’ report and inaccurate information can easily bump you out of a search against your peer group because your strategy is classified under the incorrect universe due to bad information.

Managers must also remember that this is an opportunity to tell their story and that their data is how that story is told. It needs to make sense. Having a system of oversight in place and a dedicated team who understands the database requirements is critical to having clean, consistent, and accurate database profiles. Having a seamless flow of information internally from collection to population can mean the difference between screening into searches and not out. Managers often fall short of reporting critical data, which leaves them with very low-profile completion rates. Managers need to encompass all areas of the database and assume everything is a screening opportunity.

While the process can be mundane and time consuming, it is critical to raising assets. Whether firms complete this process in-house or opt to outsource it, the process should have the same level of effort put forth as writing an RFP, providing as much information as possible and ensuring it is accurate and consistent across all areas in the databases.


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