Why investor needs Modern Portfolio Management software

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“Back in 1995 I wrote my master’s thesis about bond indices for one of the largest banks in the Nordics. The paper was about the introduction of the EFFAS standard calculation models in the bank. My conclusion was that every portfolio manager should understand the model behind the index calculations to be able to manage their portfolios efficiently. This conclusion has been confirmed several times during my career – it is perhaps one of the most important aspects of portfolio management.

This blog is about a portfolio management software. But how does index calculations and benchmark choices relate to a software? Well, this is easiest to illustrate with an example – and since alternative investments are currently trendy among professional investors, let’s use them as our starting point.

The world of alternatives is overwhelming – we can choose a variety of hedge funds, inflation linked products, private equity, infrastructure investments and other strategies. The selection will depend on our risk and return preferences, and the proper way to do this is to establish a benchmark portfolio with the right building blocks to meet our investment goals. Here we need to choose carefully among the various indices available.

A benchmark portfolio could look like illustrated below, including 20% Barclay Hedge Fund Index, 20% Barclay Long/Short Equity Index, 10% Barclays World Govt Inflation-Linked Bond Index, 20% S&P Listed Private Equity Index, 15% Edhec-Risk Merger Arbitrage Index, 10% FTSE Core Infrastructure Index and 5% Barclay CTA Index.



“But how does
index calculations and
benchmark choices
relate to a software?”


Then, we have to set up the strategy in our modern software. We have to add the indices for each component in our strategy, and after that we need to find suitable products to invest in. We might be interested in the sub-components of indices as well, and there may be a momentum indicator we want to follow.

Working in a structured way with portfolio construction and benchmark selection allows us to constantly evaluate our strategy and progress. Are we ahead of the market – or behind? Where do we assume the most risk? Are there components that needs to be changed? Do we need to rebalance the portfolio to stay in line with our goals?


We stand ready to help you. Thanks for your interest.”


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