Trade Reviews, Approvals, and Audit Efficiency

We consistently hear from multi-asset investment and operations leaders that their trade reviews, approvals, and audit functions are tracked via email, messaging systems, or customer relationship management (CRM) systems. The Osyte team has experienced this in our former roles as outsourced CIOs and portfolio managers at large and small investment management teams. This makes sense because the market's portfolio rebalancing and trade order management systems only deal with traditional, publicly traded securities such as stocks, ETFs, or futures with standard settlement terms. Multi-family offices and OCIOs deal with separately managed accounts (SMAs), commingled funds, hedge funds, and other illiquid investments that have custom liquidity & settlement terms or capital call drawdown structures, such as private equity and venture capital. ? In these situations, clients improvise and deal with the problem as best they can using other business tools that they have at their disposal or try to build their own tech stack for illiquid & alternative investment management.

A CRM system may seem a natural choice for trade approval or compliance management since each client is clearly identified, and there may be ways to tag & track each portfolio decision and action, and who made the decision, and why. This will require a lot of manual entries at various steps in the investment process, from creating a request for the trade with supporting evidence, a note approving the trade, and perhaps another note for when the trade is completed. This may seem easy enough when there are a handful of trades, but it becomes unwieldy when there are thousands of trade lines across hundreds of client accounts. Messaging systems such as Microsoft Teams or email systems are no different, where you may set up a separate channel for each asset owner client and send 'trade' messages with supporting evidence to the approver every time a trade needs to be implemented.

Clients are incurring significant costs when using CRM or Messaging systems for trade approval and compliance management:?

1. Poor performance from unknown trade errors. Disjointed/manual trade approval & compliance management processes cannot identify current portfolio exposures, investment targets, and how the intended trades will impact portfolio positioning. It is up to the reviewer to check this manually line by line with portfolio data in spreadsheets, accounting systems, and liquidity terms in calendar reminders. Trade errors that go unnoticed for months eventually show up as poor performance.?
2. Opportunity costs (missed investment returns) result from implementation delays. Implementing trade allocation changes for illiquid assets across multiple clients may take days or even weeks.
3. Reputational risk, lost clients, and perhaps even regulatory fines for inaccurate trade reporting, and the inability to audit historical investment decisions and trades.