Founded 12 years ago, the company has cross-asset class capabilities including bonds, commodities and foreign exchange. It provides a sophisticated order management system (OMS), portfolio modeling, compliance and cash management services. About 3,000 traders and portfolio managers at leading buy-side firms use ThinkFolio currently.
The acquisition is the latest sign that Markit is moving beyond its comfort zone in middle office products with enterprise data management, risk analytics and reference data, to get closer to front office activities.
By expanding its technology offering, customers will now have the ability to source order management and portfolio management software as well as enterprise data management, transaction cost analysis and iBoxx fixed income indices, the company said in today’s release. All twenty employees are joining Markit along with its CEO Andrew Walsh who will join the enterprise software management team at Markit.
“We were looking to move more into the front office,” said Daniel Simpson, managing director of enterprise software at Markit, in an interview today. After looking at the market where it found a few good independent order management, portfolio software vendors, Markit chose to acquire ThinkFolio, because it was “head and shoulders above everything else in the market,” said Simpson. Markit knew the team and had worked with them for four or five years through mutual clients while doing its due diligence on the firm. “It was very complementary with our existing suite of middle office product and took us squarely into the front office,” said Simpson.
Its team of 20 employees built a business with 50 clients, predominantly tier-one asset managers, which impressed Markit. “It is easy to install in, has transparent pricing structure and high touch customer support. It ticks all of the boxes for us,” said Simpson. Occasionally, however, the small firm met resistance to buying its software because of its size and balance sheet, but Markit with its global reach and large balance sheet, believes it can lower the barriers. With a footprint across 3,000 customers on the buy and sell side, Markit said it can introduce ThinkFolio to many more, buy-side as well as sell -side firms.
One of ThinkFolio’s strengths as compared to competitors is that it can trade cross-asset classes and their derivatives. “They cater to very complex credit and fixed income derivatives and also can handle cash equities. We found a lot of the OMS/EMS providers started in equities and over time, bent their product to enter the more complex credit products,” noted Simpson. All of its founders worked with in large institutional asset mangers that required cross-market coverage. “So they started at the complex end of the spectrum and rolled backwards,” said Simpson.
Markit sees the potential for close synergies between ThinkFolio and its enterprise data management solution. “We think we can get data into the system faster,” says Simpson. We can take what is already a quick implementation time for ThinkFolio and make that faster,” he said. A lot of the challenges of these systems are related to plumbing, how to get positions scrubbed, how do you capture reference data. We have all the plumbing today with Markit EDM platforms.” As ThinkFolio is integrated, there will be opportunities to cross-sell Markit’s other products, such as EDM, risk information, legal entity identifiers and market risk analytics.
In terms of its edge, Simpson said ThinkFolio has been starting to replace some of the legacy OMS applications that have been around for ten to fifteen years, that don’t have full asset coverage. As an OMS, it offers full FIX connectivity, and is vendor agnostic and has pre-and post-trade compliance, full rebalancing and remodeling and ash management, which Simpson said, “a lot of the OMS vendors fall down on.” ThinkFolio will operate as a business unit alongside Markit's other enterprise software solutions including analytics, enterprise data management, and WSO, a portfolio management system for the loan space.
Even though ThinkFolio will be interoperable and over time look and feel like other Markit products, it will remain independent in terms of taking market data from other vendors and connecting to other platforms. “It will connect with other risk systems or even other EDM systems for that matter,” said Simpson, adding, “We’re not trying to impose one size fits all.” Markit will integrate its products with ThinkFolio, but it won’t force people to take the full suite if that’s not what they require, he said.