Analytics program compares risk and portfolio performance

PUBLISHED : Sunday, 23 September, 2007, 12:00am
UPDATED : Sunday, 23 September, 2007, 12:00am

One of the largest groups of independent financial advisers in Asia is singing the praises of a software research tool new to the region that gives quick and accurate analyses of funds portfolios and compares them to other models.

Phil Neilson, chief executive of The Henley Group, has adopted the tool called Analytics, developed by independent researcher Financial Express, to give his clients up-to-date comparisons on how their portfolios are performing.

'What it meant for me, as the head of an investment adviser practice, was for the first time we could have robust research available and look at any client's funds portfolio - whether it's one we're managing or an external one from another source - and see the actual performance of that portfolio, run it through Analytics and have a number of simple figures that we can pass on to the investor on how that fund has performed over a given period, and also at what volatility or risk.

'There are some measures for more detailed information for our sophisticated investors, where we can look at the alphas and betas and the various ratios people might use.

'For the retail investor through to the professional investor it's a really practical tool to look at a portfolio and then compare it with model portfolios that a practice like ours would make available, so they can see the workings of their portfolio and how it compares.

'A client may have a range of funds and they may have had a reasonable return of say 15 per cent over the past 12 months - because it's been a very bullish market - with a volatility of about 7 per cent.

'And yet with this software they can look at other portfolios and find for the same risk they could have produced 25 per cent, so it empowers the client to be genuinely more informed to make better future decisions.'

James Jones, executive director and head of Asia-Pacific for Financial Express, said analytics software was open to investment professionals and one of its core strengths was 'all about optimising a client's portfolio'.

'Quite often, even when someone is doing funds selection for a client, there could be funds they recommend but don't actually analyse how they behave against one another,' Mr Jones said. 'So you might have a portfolio with 10 funds and you might think that's a great diverse portfolio. But if you look at the correlation of it by using this tool you might find they all actually behave in the same way, which is not very good portfolio management.

'It's all very well in a bull market, but when things get more volatile, if they're all behaving in the same way, that's not great for the portfolio.'

Financial Express is a British data company that collects information on about 70,000 funds around the world, which is then sold to various institutions.

'About three years ago, we decided to build our own analytical product to sell as an off-the-shelf solution,' Mr Jones said. 'More than 3,000 independent advisers now use the system in Britain and we thought to go global and so we came to Hong Kong, Dubai and South Africa, where we cater for the individual markets at each base.

'We've been in Hong Kong about 10 months and reactions have been excellent. We have about a dozen firms using Analytics.'

Mr Neilson said The Henley Group uses Analytics mainly for new clients 'or people who have been referred to us - we use it as an opportunity for them to see what high-end wealth managers can do to help them understand how well they're doing. It works very well, because for the first time they have a benchmark. Progressively now we are introducing it as the next level of service for existing clients.'