The head of investments at a large company with a sizable portfolio describes reporting processes and paths.
A member of one of NeuGroup’s two investment management groups who oversees a significant investment portfolio at a major tech company recently described to peers what reports he receives daily as well as what information is reported within the company and how often. The member receives approximately 15 reports daily by email, his preferred delivery method. The emails are sent to the team and include:
- Trading information. Used to make decisions on whether or not to buy a security or a bank deposit or “a strategy you’re thinking of deploying,” the member said. “We need to make sure when we’re doing that kind of trading that we have the information in front of us.”
- Managerial reporting. Includes a daily report showing the sale of securities made internally or externally (by manager, mandate and total gain or loss for the day and the quarter). “We want to make sure nothing got sold that shouldn’t have been or is unusual or resulted in large profits or losses,” the member said.
- “We do the same thing on the buy side so we know what we’re buying and don’t get surprised.”
- The reports help track activities, manage gains and losses, as well as ensure consistency with current strategy.
- Daily flash reports. These snapshots break down the portfolio by mandate, gain or loss, change day-over-day, duration and option-adjusted spread (OAS) of each mandate, and yield of the portfolio.
- Daily credit reports. The member described these as “early warning systems.”
Governance: sitting down with management. These are weekly capital markets meetings scheduled for 30 minutes where a packet of information is reviewed by the company’s treasurer, assistant treasurer (AT) and others, including the treasury controller.
- They review: market and economic developments from the week; cash balances; how does those affect other income and expense (OI&E); mark-to-market; strategies; upgrades and downgrades; noteworthy external meetings with managers and others; liquidity.
- Decisions made at these weekly meetings include approving any exceptions on credit. “If something falls out of compliance, we need to assess and take corrective actions or get an exception,” the member said. His team provides a recommendation for a course of action. Other business includes:
- Reviewing a credit watchlist, including discussion of strategies for assets on the list.
- Liquidity positioning decisions, made in consultation with the treasurer, AT and head of cash operations, based on liquidity forecasting tools and reports.
- Asking for opinions if the investment team “wants to do something off the beaten path.”
- A summary email of the meeting consisting of a 20-page deck is sent to the company’s CFO, who at times calls the member to ask a question.
Performance reporting. In response to a question from another member, the presenter said the company reports on managers at month-end, starting with how the overall portfolio did in relation to its blended benchmark. Also:
- “We look at each mandate and ‘horse race’ each manager,” including portfolios the company manages internally, comparing performance to the mandate’s benchmark.
- The company sends the horse race information to each manager, but doesn’t identify the names of other managers. It’s presented in one-month, three-month, one-year, three-year, five-year and since inception views.
- The company produces a scorecard with qualitative and quantitative measures that are shared with the managers.
- Managers who consistently rank at the bottom, are not taking direction or not giving quality feedback may be replaced. The member said the company is always prepared with a vetted backup for each mandate.
Board meetings: less granular. Meetings with the board take place every three months and feature high-level reports. These involve an “internal board’ that includes the member and his team, the company’s CFO, treasurer, ATs and one or two company board members that join along with legal and other parts of treasury.
- These meetings are used to set overall strategy, policy approvals, formal exceptions and compliance approvals, and grant approvals on a variety of topics as necessary.
