Investment controlling

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Investment controlling refers to the independent monitoring and control of the implementation of asset management mandates in investment processes. Similar to the original term controlling , it is a German made-up word , composed of English: to control for "control" and investment for "investment". In contrast to this, the German term “investment control” refers to the investment process in companies.

Explanation

In the case of institutional investors , such as pension funds , the highest body is usually responsible for the investment policy and for monitoring investment activity. It depends on an objective and neutral information base in order to perform its management task. The task of investment controlling is therefore to balance out information asymmetries and to provide a neutral information basis for the highest body, for example the board of trustees. Continuous monitoring of investment activity enables problems such as insufficient investment performance, insufficient diversification or too much leeway for the asset manager to be identified and rectified. At the same time, Investment Controlling has the task of pointing out any deficiencies in the plant area and developing and proposing improvement measures. Investment controlling is ideally based on the investment process. In the investment process, the first step is to define the investment strategy, then the investment tactics and then the specific implementation with asset management mandates. Investment controlling then continuously monitors these process steps.

Strategy controlling

To monitor the Vemögensverwalters a Strategic usually asset allocation defined tactical bandwidths. The strategy conformity can be checked by comparing the asset structure with the strategy specifications. In addition, as part of strategy controlling, important parameters of the balance sheet structure management are continuously monitored (for example the interest rate level and the expected return on the investment strategy).

Another component of the strategy is controlling the analysis results of the system is at level total assets. The yields are both absolute and relative terms (relative to the strategic benchmark ( English benchmark )) measured, the risk incurred is tracked in parallel. A peer group comparison can be used to enable the management body to compare returns with other institutional investors .

Examples of strategy controlling are:

  • Control of the asset structure and, in particular, compliance with the statutory and regulatory ranges
  • Calculation of return and risk indicators at the level of total assets
  • Update of the technical coverage ratio , the economic coverage ratio and the risk-bearing coverage ratio

Controlling the investment tactics

Deviations in the effective asset structure from the strategic asset allocation are referred to as investment tactics (e.g. overweighting or underweighting of individual investment categories). A performance attribution shows in detail whether the investment tactic led to an outperformance or an underperformance. The return influences of the individual decision-makers (investment committee, asset manager) are separated and shown.

Examples of controlling investment tactics are:

  • Representation of the return impact of overlay programs (e.g. a currency overlay in which foreign currency risks are hedged)
  • Calculation of the return impact of the investment commission's tactical investment decisions as part of performance attribution

Controlling the investment mandates

As part of the controlling of the investment mandates, the relevant return and risk indicators are calculated and assessed for all asset managers . In addition, the investment approaches of the asset managers and the stability of the investment teams must be continuously monitored and assessed. The asset management fees are also periodically checked for market conformity.

Examples of controlling investment mandates are:

  • Analysis and assessment of the return deviation from the specified benchmark of an asset management mandate
  • An asset manager is placed on the “WATCH list” because the responsible portfolio manager has left the relevant bank.

Individual evidence

  1. ^ Daniel Lock, Roland Hofmann: Investment Controlling in Financial Consulting (=  Financial Consulting . Volume 7 ). 2012, p. 20 ( zhaw.ch [PDF]).
  2. ↑ External mandates from nonprofit organizations. Which aspects are particularly important? In: Daniel Zöbeli, Luziu Neuberts (Ed.): CEPS Research and Practice . tape 10 , 2013, p. 25 ( ppcmetrics.ch ).
  3. ↑ Max Lüscher-Marty: Theory and Practice of Investments , 1. Merenschwand. 2010, p. 1.33