Capital investments are a complex process. Most large organizations rely on a board of directors or investment committee to help create strategies for managing commercial properties and capital investments. That’s where investment analysis and portfolio management enter the scene.
Once a board of directors analyzes investments and creates a strategy, the strategy is initiated by a portfolio management team. But because the process is multi-faceted, investment analysis and portfolio management don’t always align when it comes to their objectives.
Large organizations often find themselves with unwanted risks over time. This is because investment objectives are rarely delivered as designed and the portfolios end up looking much different than they were originally planned. Although administrative leaders often question portfolio management teams for failing to meet investment and capital targets, it’s usually the process of capital investments that is the problem.
In this article, we’ll take a look into the reasoning behind the investment analysis and portfolio management gap. How can your business find new ways to properly align the two?
The Different Functions of Investment Analysis and Portfolio Management
When an organization hard capital investments, they will create an investment analysis to decide how and where to deploy those capitals. Senior leaders will set target investments and goals for performance. When these goals come together, the investment analysis process is initiated and the targets are presented as capital strategies.
Portfolio management focuses on a businesses’ operations. A portfolio management team worries about running assets. They are responsible for capital planning and budgeting to help businesses target specific investment goals. Performance is measured by capital investment opportunities.
Where’s the Weak Link?
When it comes to investment analysis and portfolio management, the disconnect comes from several sources. While there are several factors involved, they are all related to data and information. The factors involved are:
- Senior managers have little knowledge about local property data. Business leaders involved in the investment analysis process don’t usually have access to local data. That means they’re missing important operating information to help them meet their targets.
- Misaligned performance benchmarks. When capital strategies are designed, leaders often fail to set clear targets. When the portfolio management team initiates the strategies, this leads to confusion over performance.
- Poor building performance data. Long-term performance issues may result from poor building performance data. This happens because the organization will be making important investment decisions without the full or correct information they need to succeed.
What’s the Solution?
In addition to hiring a professional portfolio management company, organizations can invest in performance software to help bridge the gap in investment analysis and portfolio management. This can drastically improve operations and, ultimately, capital investment performance results. Performance software helps in the following ways:
- Creates clear performance measures and optimizes them for better results. Performance software helps teams develop and track objectives in a more effective way. It can also help organizations adjust to changing business conditions.
- Get more out of multilevel data. Since data management and interpretation is a major area impacting poor performance with investment analysis and portfolio management, software can help centralize unstructured data and manage it more effectively.
- Clearly define risks and create a better understanding. Each organization has their own set of risk factors in their portfolio. Performance software can help organizations understand their risks and get better results.
If you’re looking to bridge the gap between investment analysis and portfolio management in your business, contact our expert team to meet your capital investment targets.