From Data Deluge to Actionable Insights: How Portfolio Monitoring Tools Drive Strategic Decisions

Portfolio management is essential for investors to secure attractive returns. However, it is challenging for institutional investors and financial institutions to manage high-value portfolios. PE (Private Equity), VC (Venture Capital), hedge funds, and other entities invest in a range of high-value assets, from ownership stakes to mutual funds. These entities collect large volumes of data related to portfolio elements. Firms usually rely on portfolio monitoring and analytics tools to derive insights. Some entities might fail to leverage the power of data, thus leading to a data deluge. Continue reading to understand how portfolio monitoring tools drive strategic decisions.

When Does a Data Deluge Occur?

Portfolio analysts and researchers try their best to avoid a data deluge. It occurs when the flow of incoming data is more than what is successfully managed. The financial institution fails to analyze large volumes of data. In short, one could say that large volumes of data are being wasted. Portfolio data can lead to rich insights, which are further used for informed decision-making. The management finds it hard to make high-risk decisions in the absence of data insights.

A data deluge could occur due to numerous reasons. Some firms might not have ample analysts to leverage the power of data. Some investors might not have new-age portfolio monitoring tools for data analytics. Such firms can benefit from portfolio monitoring services provided by third parties. For instance, you could use FolioSure, a reliable portfolio monitoring tool for PE and VC firms. Third parties also help set up portfolio management strategies and develop a data-driven culture.

How Portfolio Monitoring Tools Drive Strategic Decisions?

The data deluge issue can be resolved by making full use of the data with new-age digital solutions. Portfolio monitoring solutions equipped with data analytics capabilities can improve decision-making. Here’s how portfolio monitoring solutions drive strategic decisions:

Performance Tracking Through Portfolio Metrics

Decision-making requires an exact quantity or metric. You cannot look at the unstructured data and make informed decisions. For instance, you cannot look at the financial statements of a portfolio company and determine its performance immediately. However, you can understand the performance as a whole by only viewing the financial and liquidity ratios. Portfolio monitoring solutions can track KPIs (Key Performance Indicators) at all times. Some popular portfolio KPIs are Sharpe ratio, Beta, standard deviation, Alpha, tracking error, Sortino Ratio, etc.

You can track diverse KPIs based on your preferences and requirements with a portfolio monitoring tool. A reliable tool like FolioSure can help analysts build formulas and derive customized KPIs. You can use existing or static KPIs to create new ones. These KPIs are tracked are reported in real time through the portfolio monitoring solution. As a result, you can make data-based decisions related to the portfolio.

Must Read: Building the Best Board: How Private Equity Consulting Optimizes Portfolio Governance

Risk-Free Decisions

Certain portfolio decisions can lead to increased risks for the investor or entity. Strategic decision-making cannot succeed without efficient risk management. Luckily, portfolio monitoring solutions can track risk-related KPIs in real time. You can track Beta, volatility, and other risk-related metrics to make informed decisions. Risk mitigation can help maximize the portfolio performance for investors.

Improved Collaboration

Strategic decision-making involves several individuals from top positions in the organization. It could include a board of analysts, directors, researchers, and stakeholders. Portfolio monitoring solutions allow users to share sensitive information and insights, thus leading to enhanced collaboration. Portfolio monitoring platforms implement strict data security measures to protect the shared information among users.

Easy Valuation

Most portfolio monitoring tools are equipped with built-in valuation models. These valuation models allow investors to value assets or portfolio companies in quick succession. These models can use transactions, financial spreads, and other resources to determine the worth of portfolio companies. It can help the management make quick decisions and grab investment opportunities before others. Besides valuation models, portfolio monitoring solutions include built-in cash flow engines, reporting tools, and other facilities.

In a Nutshell

Portfolio monitoring tools are the need of the hour in today’s high-risk markets. PE firms, VCs, and other entities must avoid a data deluge. They can make full use of data to generate rich insights with the help of a portfolio monitoring solution. You can start using FolioSure, a new-age portfolio monitoring solution with advanced analytics and reporting features. Start leveraging the power of data to make strategic decisions!