Using Markit EDM to manage paper portfolios

The Situation

Most brokers use paper portfolios to test investment strategies. Paper trading is an important part of strategy development and risk management, especially as financial managers work to develop new investment products. They’re also a lot of work. Many fund managers build their portfolios in excel or test environments, which can be very labor intensive or require a lot assistance from the firm’s operations team.

The Continuus Approach

One of our clients wanted a better way to set up, monitor, and (if needed) convert paper portfolios to real investment portfolios. Fortunately, this client was using Markit EDM to manage their financial data. To improve the accuracy and speed of paper trading, we updated their Market EDM system to include data on paper portfolios. We began by reviewing the entire system to identify points at which it would be important for Markit EDM to understand whether the data was real and actionable or a simulation. We wanted the fund managers to be able to analyze the effects of their strategies in the most realistic environment possible, but did not want exceptions to be flagged with the same level of urgency a live portfolio would deserve. We also did not want data exports to fail. We developed a way to flag paper portfolios in the system so that they will not cause system failures.

The Result

Using Markit EDM to set up and manage paper trades has helped our client’s portfolio managers test multiple new security types and build test portfolios with ease. Investment firms can monitor performance data with the same exceptions management and dashboards they use for live portfolios. If their ideas are successful, the portfolio can be easily copied and set up as a real fund in Markit EDM. Using Markit EDM for paper portfolios will help this investment management firm accelerate the ability to develop new funds and test the potential success of those funds much more easily.