TSG has been conducting software reviews for over two decades. Historically, we offered this service whenever anyone happened to ask “would you mind taking a look at our system?” For example, the late Damien Laker asked me to look at his system about 20 years ago: he sent me the software, I spent time “kicking the tires,” and then sent him a detailed report with my thoughts and recommendations.

The origin of software certification as a TSG service

Then one day it occurred to me: why don’t we formalize this process and turn it into a service?

And so, we did, and software certification was born!

To date, we’ve done reviews for more than a dozen institutions, which includes (as you’d expect) software vendors, custodians, broker/dealers, asset managers, and asset owners. Not everyone has passed, although several have. Some have had us look at a single functional area, while others have had us look at multiple parts of their overall system.

We take into consideration the market(s) a software vendor serves, in order to ensure we’re applying the right level, breadth, scope of testing. For example, our expectations for someone serving the institutional space are different than a firm that serves retail investors, which are different than a vendor that serves asset owners.

Scivantage passes software certification for multiple system components

And our most recent qualifier is Scivantage. John D. Simpson, CIPM and I do the reviews. Both of us spent many, many years developing software. Consequently, we have the technical experience that are required for such a review. And, we both have extensive knowledge, experience, and expertise in performance and risk measurement. This is the other critical criterion for doing this work.

For Scivantage we both participated, though I handled the broader scope of the assignment. They asked that we review these areas:

• rates of return (time- and money-weighting), including their implementation of after-tax performance
• risk measurement (specifically in regards to their employment of my favorite risk-adjusted measure, M-squared
• performance attribution (specifically regarding their implementation of the Brinson-Fachler model, along with several multi-period linking methods.

Software certification isn’t a “pay me and I’ll certify” exercise: it’s rigorous

When John and I designed this service we wanted to make sure it was thorough, complete, and rigorous. The last thing we needed was a service that “rubber stamped” software just to get paid. Want to know how rigorous the process is? Simply contact someone who’s passed!

We were confident that these reviews would serve several parties, including:

• the owner of the software
• the owner’s clients and prospects

Not only do we ensure that the software has what we believe is needed and that it works properly, we also offer commentary and recommendations as to how it can be improved.

Providing a software vendor, like Scivantage, with a certification report would allow them to provide evidence to their clients and prospects that what they offer works, and that it works well, as testified to by an independent and qualified party. We felt that our firm was uniquely positioned to conduct these reviews.

Software certification isn’t just for software vendors

Not everyone who has had their software reviewed sells or licenses their system, so why go through the exercise?

Well, they want confidence in what they’re doing, confidence that they’re employing the right formulas, and confidence that they are working correctly. And, they find benefit in hearing our thoughts, ideas, perspectives, and recommendations.

If you’d like to learn more about software certification, please contact Chris Spaulding (Spaulding@tsgperformance.com) or Steve Sobhi (SSobhi@tsgperformance.com).