Optimizing Alpha through Better Information Workflows

Abstract

This study demonstrates how investment managers can identify and resolve suboptimal operational workflows that diminish an investment strategy’s attainable alpha on the order of 24-242 basis points (annualized, gross of fees). A portfolio’s potential alpha can be best realized by addressing these portfolio implementation shortfalls through systematic improvements in the data schemas that drive the information exchanges among parties regarding transactions, holdings, and valuations. Using graph modelling techniques, we identify and resolve information workflow inefficiencies that occur both within and external to the investment firm.

TOPICS: Portfolio construction, equity portfolio management, fixed-income portfolio management

Key Findings

• ▪ For portfolio managers, implementation shortfalls stemming from suboptimal information workflows can be systematically mitigated to maximize the expression of alpha inherent in an investment strategy.

• ▪ For operational managers, re-aligning investment operations workflows to deliver differentiated support across individual strategies can significantly improve portfolio performance.

• ▪ For data scientists, graph models provide fresh evidence of the quantifiable impacts of data interoperability and information parity on the efficiency of enterprise information flows.