The enhancement will help institutional clients better understand the impact of futures, swaps and options on the performance of sophisticated investment portfolios. The new capabilities allow clients to see notional values, cost of carry and other factors related to derivative instruments utilized by fixed-income managers, in order to provide more accurate attribution of investment returns.
The enhanced analytics, available through Northern Trust’s web portal, Passport, gives clients more detail on why a fixed income investment manager outperforms or underperforms a benchmark. Clients with multiple asset class strategies can use the information to better understand the impact on their portfolio’s returns from various types of instruments, such as equity, fixed income and commodity swaps, as well as options and futures. Northern Trust’s reports also show the economic exposures on each leg of a swap or option, highlighting the asset class and country risk to which the client is exposed.
“With the increased use of derivatives in institutional investment strategies, it is important that we provide a higher degree of transparency to give clients a more complete view of their portfolio holdings,” said Paul d’Ouville, global head of product management at Northern Trust. “This feature allows clients to view asset level returns for each investment strategy of a swap or option. Swaps or options may be combined with futures and physical securities or shown separately in the report, depending on the client’s preference.”