The benefits of improved performance and attribution (P&A) reporting are well documented. Not only does the reporting provide investors with insights on how their financial professionals have added (or subtracted) value, it also provides the investment community with an important tool to (hopefully) improve their investment management processes. What is less understood are the operational and Information Technology (IT) challenges that arise as P&A reporting becomes more sophisticated. While implementing straightforward P&A reporting may have relatively modest impacts on operations and IT, in our experience, there is an almost exponential increase in operational complexity as the complexity of P&A reporting rises. Eventually, the capacity of operations and IT will be reached, and any attempt to further increase the quality of performance reporting will actually result in the opposite effect. That is, the quality of reporting actually degrades as attempts are made to increase sophistication. Unfortunately, the end customer may not be aware of, or care about, these operational limitations.

Operational and IT Consequences of Performance Reporting