The Investment Objective

When discussing the topic of investments, the average person is inclined to think that the goal of investing is to gain as much profit as possible. While this is true in some cases, the reality is that investing is only a means to execute a structured plan with an objective in mind. Much like a store where people can find goods based on their interests, banks and wealth management services offer different strategies to clients based on their current needs and future plans. In these relationships, the most important measure of success is how well the manager has adhered to the objective for the client.

“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” – Benjamin Graham

The selection of a strategy is the result of an extensive assessment of the client’s circumstances, financial goals, requirements, and risk tolerance. Once implemented, the decisions of the manager must be monitored closely to minimize potential deviations from the strategy. Over the last two decades, the global standards surrounding wealth management have taken considerable steps to reinforce ethics within all stages of investment practices. Performance measurement is where investment firms can create partnerships to address the information disparity between manager and client while adhering to the always-changing investment standards.

How can wealth managers and banks use investment reporting services, like GreenHill, to add value to the relationship between manager and client?

Benchmarking remains the most commonly used method to evaluate manager performance, however if done incorrectly can result in multiple levels of misinformation across the firm. Investment strategies often employ a variety of asset classes so naturally the benchmark assigned to the strategy should be an accurate representation of its components. GreenHill’s “Investment Objective” functionality allows you to choose multiple indexes and weights for each to create a singular custom benchmark. Selecting the appropriate benchmark for an objective gives the manager access to meaningful quantitative metrics when evaluating their execution of the strategy and lets current and prospective clients know that the firm is engaging in fair procedural practices.

The ability to dissect a portfolio’s construction and performance is also a powerful tool for both investor and manager. In the eyes of the investor or client, every asset within the portfolio is an indication of how well the manager abides by their requirements and understands their needs. For managers, performance at the asset level class is not sufficient in analyzing the effect of their decisions. With GreenHill’s Security Contribution module, managers can identify how many basis points each asset contributed to the asset class or overall fund return. In a manager’s analysis of whether they are within the constraints of their strategy, recognizing outliers within the portfolio is an essential step in their due diligence. Providing granular detail to both manager and clients facilitates transparency in the relationship and progressive improvements within the investment process.

GreenHill continues to develop and improve functionalities like these with both wealth managers and their clients in mind. Listening to a client’s conditions, understanding their needs, applying the strategy, and communicating the results make the relationship between a manager and client more personal than one might think. GreenHill’s mission as an investment reporting service is to give managers the tools to facilitate the dynamic between them and their clients through analysis and transparency.