How to maximize credit research efficiencies: five tips for portfolio managers.

Do you consider yourself a savvy portfolio manager? Of course you do. But are you aware of the critical elements that are helping your competitors become even more perceptive regarding the constantly fluctuating credit market?

The factors that distinguish great portfolio managers from merely good ones are the timeliness and accuracy of their credit information. To make strategic, informed investment decisions that lead to profitability for their clients, portfolio managers must be able to cite current ratings and interpret the latest models and analytics. Strategies that are implemented based on unreliable research and outdated information can lead to dissatisfied clients and lost revenue.

The wealth of credit data and analysis can appear overwhelming. And, for busy portfolio managers with a variety of clients with specific needs, finding and using quality data can spell the difference between a good and bad reputation. The following tips can help portfolio managers avoid the pitfalls of misusing ratings data or not taking advantage of all the intricacies that accurate information can reveal.

Tip 1: Don't just read credit information. Integrate it.

All the credit information in the world--be it from newsletters, newspapers, newswires, web sites, or analyst recommendations--cannot promote effective portfolio management if it is not applied correctly as a singular, integrated unit. It is vital for portfolio managers to combine outside analyst data with their own data, by customizing ratings delivery to function as a cohesive unit, which together deliver critical, timely insight into market trends. Integrating credit rating data--which can stream through a variety of formats, including ASCII and XML--significantly enhances the breadth of available information and supports the decision-making process for the benefit of the client. Once you integrate data, it becomes raw material for many purposes. For example, you can use it to feed into models, mold it into reports for internal management meetings, or put them together into a customized client presentation. You can also compare and contrast internal credit ratings with external credit ratings; this benchmarking process can serve as a barometer or as a way to spot major inconsistencies between your perception of credit quality and others' perceptions. The technology also exists to put data directly onto your public web sites or intranet systems, thereby eliminating ratings discrepancies and the errors that can often occur during manual updating. When outside data is integrated with your own, it keeps your information clear and consistent.

Tip 2: When gathering credit information, consider the source.

The line between interpretation and misinterpretation can be as thin as one letter, such as a 'BB' rating versus a 'BBB' rating. From a credit perspective, it means the difference between investment-grade (an indication that there is minimal risk that an issuer will default) and noninvestment-grade (an indication that there is more risk). Because web sites, newspapers and newswires can have outdated or inaccurate ratings, or place analysis in the wrong context, it is best not to rely solely on such second-hand information. To be an informed and effective portfolio manager, query reputable databases that are updated in real time to obtain the most relevant and accurate ratings data. When you download information directly from its source to your database, you can avoid some of the risks that come with more circuitous modes of transfer. This practice can substantially increase your accuracy, in addition to customer satisfaction and ultimately, profitability.