The financial landscape is ever-evolving, and clients are constantly searching for attractive Alts to diversify their portfolios. In the US market, wealth managers prominently focus on non-traditional assets such as collectibles, hedge funds, private equity, and real estate, among others. However, managing and reporting these assets have unique challenges as they do not fall under the conventional reporting standards. Also, some challenges arise from the opaque and illiquid nature of the assets requiring maintenance of special data. Let us understand why more accurate and granular alternative investment reporting is needed to enhance a transparent view of clients’ portfolios.
Wealth managers find it increasingly challenging to comply with the regulatory reporting standard in the US market while maintaining the portfolio's transparency for clients and meeting their need for timely performance insights. Let's take a closer look at some of the Alts avenues to understand the difficulties associated with them.
Private Equity:
These investments require clients to invest in private companies not listed on any US public exchange. This makes the assets illiquid and requires clients to be invested for a longer period, such as 5 to 10 years. Tracking the performances of private equity requires wealth managers to understand the portfolio valuations, which are sometimes subjected to limited financial data. In addition, the lack of transparency increases the complexity of ascertaining the rate of investment which adds to the complexity of reporting as well.
Hedge Funds:
Hedge funds are pooled investments in which the client invests in securities or another form of investments to gain higher positive returns. These markets are not heavily regulated and present a high degree of opacity. This makes it difficult for wealth managers to understand and report on the performance of the fund and use tools like short positioning, leverage, and complex derivatives. Also, the company does not provide timely reporting on hedge funds. Some companies may provide quarterly reports, while others are less consistent. Thus, making alternative investment reporting all the more challenging!
Real Estate:
Investment in real estate takes place using direct ownership, real estate investment trust method, or other similar vehicles. On one hand, the different moods of investment add to the layer of complexity on the other, the valuation of the holdings is often subjective and dependent on the appraisals and market conditions. There are also chances of property income that arise due to rental payments or capital appreciation. Hence, in reporting this avenue of Alts, the wealth manager is required to account for different incomes. Real estate also offers challenges to wealth managers owing to the assets' non-liquid nature, which may take time to sell and not divest quickly.
Collectibles:
Collectibles range from rare art, wine, and vintage cars that may allow the clients potential for significant returns. However, these assets do not have a standardized pricing model and are more challenging to report due to their non-liquid nature. Wealth managers have to rely on appraisers to estimate the values which further enhances the uncertainty while reporting with such assets.
Thus, the challenge of alternative investment reporting arises from the difficulties in consolidating information from various sources to capture relevant data accurately and produce timely reports for the clients.
Technology increasingly relies on aggregated data sources and automated tools to bypass the complexities of alternative investment reporting. Given the wide variety of data formats used in wealth management, technology can collect data in real time and provide consistent reports to clients. This is crucial when dealing with assets such as private equity, hedge funds, and real estate as it allows wealth managers to compare performance across different asset classes more easily. Also, automated data capturing and reconciliation using technology can be used for enhanced alternative investment reporting. Technology allows data aggregation into a central platform via various custodians and asset managers. This reduces the errors due to manual entry and helps wealth managers to reconcile different data sources accurately and quickly. Automation also helps in reporting consistent and up-to-date data.
How PCR Insights Helps
We are committed to simplifying alternative investment reporting for wealth firms. As a leader in financial data aggregation, we specialize in reporting Alts and wealth management. We have over two decades of experience which helps us develop comprehensive solutions to address the unique challenges of alternative investment reporting. Here is how we do it:
1. Comprehensive data aggregation: PCR Insights consolidate data from various asset managers, financial institutions, and custodians into a single platform. This allows clients to view their portfolio in a unified manner and helps wealth management by tracking performance across all asset classes.
2. Alternative investment expertise: PCR Insights has a deep understanding of the complexities of Alts avenues. Our platforms are designed to handle unique reporting according to assets' needs, ensuring wealth management with accuracy and up-to-date information.
3. Seamless integration with wealth management platforms: We provide integrated data with an existing wealth management platform that allows a firm to incorporate its data aggregation reporting capabilities into aggregated workflows. This also allows PCR Insights to integrate operational efficiency and minimize disruption in alternative investment reporting.
4. Real-time reporting and analytics: Our website offers wealth management through real-time reporting capabilities where clients can track the performance of alternative assets and generate reports timely. This ensures that our clients receive relevant information and can make informed decisions about their portfolios at the right time.
As alternative investment avenues continue to grow in popularity. Wealth managers are increasingly required to provide accurate, transparent, and timely reports. The challenge of tracking hedge funds, private equities, real estate, and collectibles can overwhelm even the most experienced professionals. However, embracing technology care solutions like PCR Insights can help wealth management through streamlined reporting, reduction of error, and enhancement of transparency in clients’ portfolios. Tools such as automated data capture, real-time performance, tracking, and standardized reporting allow wealth managers to deliver a clear and comprehensive picture of clients’ Alts. This will not only strengthen client relationships but also improve operational efficiency by allowing wealth managers to stay ahead of the market and move from chaos to clarity!