Getting quick and accurate data that shows if a portfolio is out of line with its objectives can, if acted upon rapidly, cement client relationships and build trust, a figure in the Swiss investment industry says.

The “open source” movement in computer software upended how people thought about the business of IT, the control of intellectual property and how to charge for business. And an investment industry entrepreneur in Switzerland wants his own firm to have a similar impact.

Nicholas Hochstadter, founder of Investment By Objectives, a company created more than 10 years ago, is, he says, an evangelist. His business, located in the Morges area of Switzerland, gathers daily price and related data from banks and other financial organisations in return for giving these contributors information showing if their portfolios are in line with, or drifting away from, stated objectives. (Information is given on condition of anonymity, to protect privacy.) Such data can provide users with an early warning that something might be going wrong. Because the original data is gathered without paying a fee, it is not massaged to suit commercial considerations. IBO earns a living by licensing its software (known as PerformanceWatcher), consulting and certification.

With financial markets getting off to a turbulent start this year, and regulators breathing down wealth managers’ necks to ensure investment products and services pass suitability requirements, the need for objective data on investment returns and risk is as urgent as ever. Hochstadter’s business is growing – it has added Liechtenstein to its network of offices and is looking to branch out across the Continent, and beyond. 

“There is no real boundary for what we can do,” he told this publication in a recent interview. 

One crucial benefit of his business model, Hochstadter said, is that because its information gives banks and others an early indication of potential problems, rather than fear that data would be used by clients to sack them, financial organisations can quickly put problems right and actually deepen client links. IBO’s web-based outlets include its Performance Network channel. 

“We can prove to the client that a bank is doing a fair job. They [banks] saw that we were not against them but making their links with clients stronger,” Hochstadter continued. 

It is easy to see how style drift and other problems can arise in a banking industry that, because of pressure from banks’ shareholders, tries to maximise returns for clients and can take on excessive risk. It is not the bankers’ fault – it is a fact of life, said Hochstadter, who takes a philosophical rather than moralistic attitude to some of the problems of finance.

There are a number of firms tracking performance of funds, of course, such as Lipper and Morningstar, and private client portfolios are also tracked and analysed by the likes of Asset Risk Consultants, or Stamford Associates (a London-based business). Hochstadter reckons that his firm is unusual in its “open-source” model, and its daily price data (and having 10 years of it).

As the firm now sells its information to institutions and professionals, and is growing, it is taking on staff and looking to expand geographically. As well as the recently-opened office in Liechtenstein, it is to open operations in Monaco. There is interest from clients in Belgium and the Netherlands and the firm has had “some very interesting discussions in Austria”, Hochstadter said.