government and institutional investment survey...
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GOVERNMENT AND INSTITUTIONAL
INVESTMENT SURVEY REPORT | 2017
INTRODUCTION
Treasury and investment accounting professionals face numerous challenges: transparency to their constituents; shifting regulatory requirements; investment policy compliance monitoring; pressure to provide accurate and timely information to stakeholders; and more.
Clearwater Analytics® recently conducted the 2017 Government and Institutional Investment Survey to explore these challenges and the solutions governments and institutions have found to solve them. Survey respondents, including accountants, managers, directors, treasury and investment professionals, controllers, portfolio managers, and more, provided information about team structure and strategy, key accounting and reporting processes, and investment allocations. The following report provides an overview of the investment accounting and reporting environment for governments and institutions and key benchmarking data so organizations can compare their processes, strategies, and common challenges against those of their peers.
ABOUT CLEARWATER ANALYTICS
Clearwater Analytics® provides industry-leading web-based investment portfolio reporting and accounting services for government entities, institutional investors, corporate treasuries, insurance companies, and investment managers. For more than a decade, Clearwater’s daily-aggregated and reconciled solutions have delivered quality portfolio transparency for clients such as City of Newport Beach, Orange County Transportation Authority, Knights of Columbus, Sagicor, Guarantee Trust Life, Cisco, Facebook, Oracle, and Starbucks. Clearwater reports on more than $2 trillion in assets across thousands of accounts daily.
Table of Contents
SURVEY HIGHLIGHTS 4
DEMOGRAPHICS 6
TIME AND PROCESSES 12
CHALLENGES 20
SURVEY HIGHLIGHTS | 4
Growth vs. Scalability
As shown in the graph on the right, team size was primarily divided between small and large, with most respondents working on teams of one to two, or eight or more. Both groups included those at organizations with large portfolios of more than $5 billion.
For team size, governments and institutions are choosing between two distinct strategies: growing or scaling. Growing team size simply means adding personnel to overcome new challenges. Scaling, on the other hand, is achieved by leveraging tools and technology to do more work without adding staff. With respondents managing such large and seemingly complex portfolios with teams the fraction of the size as others, it is clear that many organizations are implementing the right tools to achieve true scalability.
SURVEY HIGHLIGHTS
> $5B
$1 - $5B
$500M - $1B
$250 - $500M
$100 - $250M
< $100M
>87-85-63-41-2
SURVEY HIGHLIGHTS | 5
Automated Processes vs. Manual Processes
39% of those surveyed no longer rely on spreadsheets and manual data entry for investment reporting, with the majority using some type of technology for automation.
The other 61% still rely on manual spreadsheets and data entry. Of that group, an overwhelming 90% rely on custodian and asset manager data to aggregate and reconcile data, and then calculate accounting entries, which slows reporting and period-end close times considerably. This information is telling: governments and institutions have room for improvement when it comes to updating their data management infrastructures. Automating investment accounting and reporting processes is a key way to do this.
Gaining Efficiency Through Automation
More than 50% of respondents take longer than a week to close their books at period-end, and 17% require more than a month to close. Long and cumbersome close processes are a hallmark of manual investment data aggregation and reporting for institutions and government entities. Leveraging an automated investment accounting and reporting platform can be a key tool many institutional investors do not take advantage of to help them gain efficiencies.
Infrequent Interperiod Reporting
Having daily access to investment policy compliance status, portfolio risk exposure, and overall performance metrics provides transparency for constituents and stakeholders, especially during times of market volatility. However, 73% of those surveyed do not provide interperiod reporting.
DEMOGRAPHICS | 6
With survey responses from a wide array of professionals who handle a variety of portfolio
sizes, the 2017 Government and Institutional Investment Survey captured a snapshot of
industry challenges, perspectives, and strategies leveraged by treasury professionals.
DEMOGRAPHICS
DEMOGRAPHICS | 7
Which of the following best describes your role?
27%
11%
31%
Manager/Director
Controller
AccountingProfessional
21%
4%
6%
Portfolio Manager
Other
Treasury/InvestmentProfessional
DEMOGRAPHICS | 8
What is the approximate size of your institution’s investment portfolio?
9%
11%
16%
16%
13%
35%
$500 million–$1 billion
> $5 billion
$1 –$5 billion
$250–$500 million
$100–$250 million
< $100 million
DEMOGRAPHICS | 9
Which assets are you currently invested in?
81%
Governmentagencies
72%
Certificatesof deposit
67%
Moneymarket funds
51%
Municipalbonds
43%
Commercialpaper
33%
Corporatedebt
28%
Mortgage-backedsecurities
24%
Mutual funds
19%
Asset-backedsecurities
15%
Commonstock
5%
Forwards
5%
Futures
5%
Options
15%
Other
14%
TreasuryInflation-Protected
Securities (TIPS)
9%
Preferredstock
NOTE: Respondents were asked to check all categories that apply to their organizations, so the sum of all percentages is greater than 100%.
DEMOGRAPHICS | 10
Approximately how many people work on your investment finance/accounting team?
1–2 3–4 5–6 7–8 8 or more
31%
20%
11%
6%
32%
DEMOGRAPHICS | 11
What is your target duration?
14%
14%
32%
1%
11%
4%
13-18 months24%
10-12 months
> 24 months
19-24 months
7-9 months
4-6 months
1-3 months
TIME AND PROCESSES | 12
Treasury professionals and accountants rely on a variety of tools and processes to meet their
investment accounting and reporting requirements. New GASB requirements have only
added to these challenges, and governments are relying on many types of solutions to
deliver the in-depth reports they need.
We asked survey respondents about the time they spend on investment accounting
and reporting, which software solutions they employ, and more.
TIME AND PROCESSES
TIME AND PROCESSES | 13
What systems or services do you use for investment accounting?
61%
Spreadsheets andmanual data entry
48%
Custodialstatements
26%
Rely on asset manager(s)for reporting
24%
Web-basedreporting solution
16%
Consultant
16%
Installedreporting software
9%
Other
NOTE: Respondents were asked to check all categories that apply to their organizations, so the sum of all percentages is greater than 100%.
TIME AND PROCESSES | 14
Do you hire external asset managers/consultants to help with GASB disclosure reporting?
No I do not work withexternal asset managers
Yes
6%24%
70%
TIME AND PROCESSES | 15
How much time does it typically take you to close at period-end?
4-7 days 1-2 weeks 2-4 weeks > 4 weeks1-3 days
17%
9%
24%
28%
22%
TIME AND PROCESSES | 16
How many outside asset managers/brokers do you work with to manage your portfolio?
Two > TwoOneNone
25%
20%
27%28%
TIME AND PROCESSES | 17
Approximately what percentage of investments are managed in-house?
7%
6%
23%
7%
13%
44%
25% managedin-house
Not managedin-house
< 25% managedin-house
50% managedin-house
75% managedin-house
100% managedin-house
TIME AND PROCESSES | 18
Do you currently provide interperiod reporting to other government agencies?
Yes – thisinterperiod reportingis performed in-house
Yes – thisinterperiod reporting
is supported externally
No
6%
73%
21%
TIME AND PROCESSES | 19
Have new GASB standards required any of the following?
66%3% 1%
5%11%24%
Hiring of additionalteam members
OtherNone
Acquisition ofthird-party data provider
Change of custodyor reporting needs
Reorganization ofexisting processes
NOTE: Respondents were asked to check all categories that apply to their organizations, so the sum of all percentages is greater than 100%.
CHALLENGES | 20
Regardless of an institution’s size, long-term goals, or portfolio complexity, investment and accounting teams are concerned about how to overcome their data-related challenges.
We asked survey respondents about their immediate concerns and biggest challenges. Their answers provided perspectives directly from the institutions affected by GASB reporting and insights on executing a thorough, timely, and accurate filing process.
CHALLENGES
CHALLENGES | 21
How satisfied are you with your current investment accounting process?
Extremelysatisfied
Satisfied Neutral Unsatisfied Extremelyunsatisfied
14%
47%
27%
8% 4%
CHALLENGES | 22
How disruptive have new GASB requirements been to your established reporting processes in the last two years?
Unaffected Disruptive Very disruptiveSlightlydisruptive
4%16%
28%
52%
CHALLENGES | 23
Which GASB report has been the most challenging for you to complete?
GASB 31 GASB 40 GASB 68 GASB 72 Other
9% 10%
45%
28%
8%
CHALLENGES | 24
Best Practices Through BenchmarkingIndustry benchmarking is an important practice for institutions dedicated to evaluating and improving their investment strategies and investment accounting and reporting processes. At a time when technology is revolutionizing how organizations are managing, analyzing, and effectively leveraging their data, treasury professionals benefit from participating in the conversation around operational best practices and solutions.
Clearwater is dedicated to providing benchmarking data that will help treasury and investment accounting professionals do their jobs more effectively. This data will be updated in subsequent annual editions of this report.
Copyright © 2017 Clearwater Analytics. All Rights Reserved 8.17 v1. CC
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