Improving Portfolio Performance in the Face of 8.6% Inflation

How CIOs are solving the inflation puzzle with the use of technology.

The pricing power of today’s tech-enabled investment office

Rapidly rising inflation (8.6% in May, according to the latest CPI report as of June 10, 2022) is placing greater cost pressures on today’s investment office. With some teams still struggling with the fallout from the great resignation (44% of workers look for a new job), we have seen the transformative power of technology enabled services helping teams move the needle.

In this rising interest rate environment, numerous challenges have surfaced while at the same time Chief Investment Officers need to boost returns to fund retirements and philanthropic aims alike. Slashed budgets and continued hiring pressures have demonstrated the need for flexible and reliable solutions.

The deflationary force of technology as a service

There are many benefits to finding the right technology to navigate challenging markets. The application of not only technology, but also on-demand services, can help allocators more efficiently measure and monitor their asset managers and strategies to better inform decision making and portfolio construction. Vidrio’s allocator clients across the globe are utilizing technological tools and managed services as a cost-effective way to operate in a quick changing investment environment.

As CIOs move from a fixed cost to a variable cost, it also helps to create a nimbler investment organization. As our clients’ assets grow and portfolios expand, their costs do not rise at the same speed. One strategic option for allocators to battle labor shortages and bring down labor costs is to rethink how technology can play a greater supporting role in investment management.

Technology costs are not rising as fast as the cost of business travel, talent retention, and office overhead. As such, Investment technology can support the agility required to better respond to business/market disruption.

Great resignation has forced an operational rethink

Changing the way things are done is not just a management exercise, but a response to the pressures that have emerged due to the great resignation. What we see in the industry is that the reality of the great resignation is not about compensation or even over returning to the office. It’s more a question of effectively keeping the investment staff engaged in activities that can boost long-term investment performance.

Traditionally, collecting manager data was at the bottom rung of the ladder with the thankless task of filing and compiling investor letters and meeting notes. In the past many have opted to outsource to teams off-shore to save costs. The decision to employ both technology and an extension of staff via a technology enabled service can help one’s investment team focus on interpreting data sets rather than gathering data and managing manager updates and performance figures.

We see Vidrio’s services as an extension of staff. Junior level staffers would rather spend time meeting managers, going to conferences, gathering ideas and writing research reports. As it becomes more difficult and more expensive to retain talent, especially in entry-level analyst positions, there is a greater role for technology and outsourced services to play especially in times such as these where higher costs of portfolio management cannot be passed on to stake holders.

Lastly, hiring fewer entry level analysts in-house also frees up resources for more strategic senior hires as the investment acumen of a seasoned veteran is necessary in today’s volatile and uncertain markets.

How can technology impact portfolio performance?

More multi-managers and institutions today are building their own portfolios via SMAs and other investment vehicle types in order to develop customized portfolio return streams that help clients meet their return objectives. This additional reliance on SMAs and funds of one adds to the complexity of portfolio managers’ jobs. The greater the inputs to juggle – whether it is simply more managers in the portfolio or potential managers being considered – the more daunting the task of monitoring performance, assessing proper benchmarks and ensuring that the best strategy and fund manager is being used to achieve optimal alpha.

This is where the right technological tools can play a part. We have found over the years, the ability to see all of one’s investment in a consistent and clear manner can improve portfolio outcomes.

At the end of the day, we believe optimal portfolio construction is about focusing on doing what you, the allocator, do best. That is sourcing top-tier managers actively generating alpha.

For us at Vidrio, it’s about providing the best technological solutions that lead to better insights for global asset owners. Our team is proud to not only help allocators source top tier investment opportunities, but also in helping manage costs at a time when investment offices must be flexible no matter what markets, central banks or even job markets throw their way.




Mazen Jabban
Written by

Mazen Jabban

Mazen founded Vidrio Financial in 2011. As CEO, he is responsible for setting strategic direction and the firm’s product development roadmap.

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