Best Practices to Outsource Investment Performance Calculations

Firms are increasingly challenged to increase the effectiveness of their investment performance programs, manage with fewer internal resources, ensure high-quality results, reduce turnaround times, and lower costs. Outsourced managed services are becoming an increasingly popular choice for firms aiming to relieve themselves of operational challenges.

To ensure a smooth and effective working relationship, it’s crucial to follow principles and practices that align your objectives and expectations with the managed service provider.

We've put together a checklist to use when engaging a third-party to calculate your firm's investment performance.

• Define clear objectives and expectations: This includes specific required services, performance measurement methodologies, reporting frequency, and any other relevant details. It enables both parties to align their efforts to achieve the desired outcomes and ensure a successful collaboration.
• Conduct comprehensive due diligence: Assess the firm’s capabilities, expertise, data security, reputation, and track record. Review client references, case studies, and industry recognition to ensure the third-party provider is best suited to address your unique needs and challenges.
• Establish clear communication channels: Effective interaction is critical for a successful partnership. Designate points of contact within both organizations to facilitate efficient information exchange and collaboration. Regular meetings and updates will help ensure that both parties remain aligned and informed on the progress of the investment performance program.
• Develop a detailed service level agreement (SLA): A well-defined SLA outlines the responsibilities and expectations of both parties and serves as a roadmap for the partnership. The SLA should detail the scope of services, performance metrics, reporting requirements, and any other relevant terms and conditions. By developing a comprehensive SLA, investment firms can ensure a transparent and accountable relationship with their third-party partner.
• Foster a collaborative relationship: Encourage open dialogue and feedback to address any issues or concerns that may arise, and work together to identify opportunities for improvement and growth. A successful partnership with a third-party firm requires ongoing collaboration and mutual support.
• Regularly review and evaluate performance: To ensure the continued success of the partnership, assess the third-party’s performance against agreed-upon metrics and the SLA, and discuss any areas where improvements may be needed. By maintaining a proactive approach to performance evaluation, investment firms can ensure the ongoing success of their investment performance programs.

By following the best practices in this checklist, investment managers can optimize their engagement with a third-party firm and maximize the benefits of their partnership. A successful collaboration can lead to improved investment performance program management, enhanced compliance, and greater overall success in the complex and competitive investment landscape.

Download our white paper

Continue to explore the many benefits of engaging a third-party service provider to oversee and manage your investment performance program in our white paper.

This white paper will:

• Explore the case for managed services – a form of outsourcing – to address contemporary industry trends and concerns that are making the investment landscape increasingly complex and competitive. 
• Examine best practices investment managers should be aware of when utilizing a managed service provider to help ensure a successful relationship. 
• Debunk common concerns, discover best practices, and uncover solutions to help firms overcome perceived challenges.  
• Look into real-scenario case studies, such as this one, to see how firms benefited from performance managed services. 

How we help

Utilizing ACA's Managed Performance Services solutions allows firms to leverage unparalleled expertise, scalable solutions, and significant cost savings. In addition, collaborating with us can enhance service offerings, strengthen risk mitigation, simplify the intricate investment process, and seize opportunities for growth and innovation. 

Firms can outsource all or certain aspects of their performance measurement and reporting functions with the assurance they are working with a team that not only understands the technical aspects of calculating complex performance, but also knows industry best practices and regulatory expectations. Our suite of services includes: 

• Portfolio and fund performance calculations 
• Composite management and performance calculations 
• Global Investment Performance Standards (GIPS^®) compliance oversight and verification management 
• Risk and other performance-related statistics calculations 
• Gross and Net Money Weighted Return calculations (fund and deal level IRRs) 
• Private fund management fee and performance-based fee review and reconciliation 

If you would like to get in touch with our team today, we're ready to help. Start a conversation with us here.