Wall Street & Technology's Asset Management Weblog

Click iTunes icon or copy url below into your rss reader.

In the midst of this quarter's write-downs, layoffs and earnings disappointments, wealth management clearly remains a bright, profitable star on Wall Street -- in Merrill Lynch, for instance, wealth management was most strongly profitable unit this quarter and financial advisors have been promised they will be spared from the upcoming layoffs. In an interesting trend, more wealth management dollars are moving into socially aware investing. According to the Social Investment Forum, socially responsible investing assets in the U.S surged 18% from 2005 to 2007, outpacing broader managed assets. Although this research focused on institutional investors, retail investors are following the same pattern, at least according to Bill Crager, president of Envestnet. He should know; his firm's platform for financial advisors, which is used by 400 broker/dealers, beta tested a socially aware investment vehicle with a handful of small investment firms and attracted $300 million in six months.

During the weeks leading up to April 15th, firms often kick up their marketing efforts around IRAs and retirement planning. Thus, it is not surprising that in the past few months, we’ve noticed several firms introduce new tools directly retirement savings: a new Retirement Savings Quiz and Retirement Calculator from Bank of America, Charles Schwab’s new Retirement Savings Calculator and most recently, E*TRADE Financial’s new Retirement QuickPlan.

Mobile applications and the people in charge of them are gaining more Street cred, according to Todd Christy, chief technology officer at Pyxis Mobile, a provider of wireless applications for the financial industry that counts Blackstone Group, Deutsche Asset Management and OppenheimerFunds among its customers. "Mobility is becoming a first class citizen in corporate America," he says. "We're seeing more chief wireless officers on Wall Street -- at least a half dozen firms have appointed someone to be a mobility leader." A high-profile case in point is Joseph Ferra, Fidelity's chief wireless officer, but several others have that responsibility if not the title itself, Christy says. This reflects an overall increase in demand for application access on the fly, he says.

The Principal Financial Group, a provider of retirement and investment services, life and health insurance and banking with $311.1 billion in assets under management, has turned to print on demand software to streamline and reduce costs in generating and printing 401(k) statements and marketing collateral.

Investor communication is in dire need of reform, said Forrester analyst Craig LeClair in a webcast this afternoon on the SEC's proposed short-form prospectus. Most prospectuses are "written by lawyers for other lawyers to digest," he said. "It's an arcane format, it's hard for investors to get what they need out of it." The prospectus for an variable annuity, for example, might be 1,000 pages long and it may not be clear to the investor which product he owns. "The value of the information put in that large book is diminished by its inclusion with non-relevant information," he said.

In the past few weeks, State Street, Legg Mason, TD Asset Management, Bear Stearns and other asset management firms have introduced new 130/30 funds; all told, about 140 of these funds exist today. But Colin Bugler, director of prime brokerage for RBC Capital Markets, says these asset managers will face intense competition and will need to ramp up their technology infrastructure, particularly those who are new to the business of shorting stock. (To short a stock is to borrow shares from a broker and sell them to another buyer, with the obligation to buy the shares back at some point in time and return them to the lender. It's a bet that a stock's value will drop, enabling you to buy it back at a cheaper price, while having already pocketed the profit from the original sale at the higher price.)

When we read this morning that JPMorgan is opening a hedge fund services office in Luxembourg, we thought, Luxembourg? Isn't that a postage-stamp sized country with a handful of people living in it? (Lacking confidence in our geographic knowledge, we checked wikipedia and found that indeed, Luxembourg is "a small landlocked country in western Europe, bordered by Belgium, France, and Germany. Luxembourg has a population of under half a million people in an area of approximately 2,586 square kilometres (999 sq mi.)" How can a place with less than a half-million people have so many hedge funds that it needs a new hedge fund administrator? We envisioned an exclusive playground for the super-rich being fawned upon by teams of specialized hedge funds.

For startup hedge funds and existing hedge funds that would like to have an office in New York City, Eze Castle Integration announced today it's going to start offering "managed suites" at 529 Fifth Avenue and 44th Street (near Grand Central Station) early next year. The company will provide office space, computers loaded with basic office software, market data feeds, Blackberry services, a telecom infrastructure, conference rooms, a receptionist, a 24x7 help desk, a shared data center, disaster recovery via data replication to Eze Castle's Boston data center and even trial-level versions of software from Capital IQ, MarketStream and others.

James C. Perkins is a chameleon. For video segments he's produced for YouTube, Perkins, the founder, CEO and portfolio manager of Thrasher Funds, dons white sunglasses and delivers news tidbits in a hip-hop-and-MTV-influenced staccato style. For an interview with an editor at a conservative trade magazine, he speaks soberly and articulately, using longer words, lengthy and grammatically correct sentences and quickly bringing up a past job as equity analyst at Morgan Stanley.

In a sign of the rapid globalization of hedge funds, EzeCastle Integration, a provider of outsourced IT services and consulting for more than 450 hedge funds, announced today that it has set up a London operation. "Many of our clients are looking for one provider who can provide consistent service, policies and procedures in all the territories they're located, so they can easily do business across geographies," says Bob Guilbert, managing director. "It's natural for companies that are international to want to consolidate their IT best practices under one roof."

Good but busy times lie ahead for the wealth management industry – it should grow 30% annually over the next few years according to a PriceWaterhouseCoopers report – and the increasing workload is driving wealth and asset managers to streamline their tasks. One time-consuming and difficult chore is preparing investment proposals, says Bob Skea, chief operating officer of Northstar. "The primary reason it's hard is that the work is manual – they're using PowerPoint, they have to find all the client's fundamental information, they have to collect risk profile data, they need to combine all that with an asset allocation modeling tool, which is often in a different system," he says. "Information about different products — fixed income, SMAs, mutual funds and so forth — all come from different sources." And once all the right information is gathered and a proposal is drafted, it may be noncompliant, because there's no record of how the proposal was generated and where the information came from.

A new competitor called Covestor has quietly rolled onto Wall Street and is hoping to dine on the lunches of mutual fund and hedge fund managers. "We want to de-institutionalize money management and funds management," says Perry Blacher, director of marketing and co-founder of Covestor. "We're taking on the guys in the big corner offices with wood paneling who rely on people's laziness," he says.

Despite having almost half of its business come from the securities industry, SWIFT is still having a difficult time getting fund managers to join the network, SWIFT CEO Lazaro Campos told Wall Street & Technology in an exclusive interview at SWIFT's annual conference in Boston. In order to attract fund managers, Campos says SWIFT will focus on ease of use and a better fee structure.

A senior wireless executive at a large Boston-based brokerage told me today -- and backed up his argument with some serious stats -- that mobile technology will be the next area that financial services firms try to dominate in order to capture and retain users.

Registered investment advisors, the 10,000 small firms that now manage over $1.7 trillion in assets, talk a lot about the paperless office at conferences and such, but apparently are slow to adopt it. “RIAs are small businesses where the owner ends up acting as CTO and making all the technology decisions,” says Timothy Welsh, president of Nexus Strategy, a technology consulting firm to RIAs. “Many use the Advent portfolio management system and a CRM program like Goldmine. Managing paper is one of their last technology frontiers -- only one in ten registered investment advisors has implemented document management software. What’s missing is not the desire to go paperless, because everyone wants to become more efficient, but the process for how to get there.”

In a showcase today, Accenture Technology Labs showed off some of its latest projects. One, a newly developed “intelligent selling” application called Real Time Sales and Service Empowerment, could be used by wealth and asset managers, particularly in departments suffering “brain drain” – where knowledgeable managers are leaving or retiring and younger workers lack experience but are eager to learn. The Accenture application, which it developed with a French bank, is a basic customer relationship management system combined with a cognitive rules engine that acts as training wheels for the new investment manager.

Tien Tzuo, chief strategy officer, and Renny Monaghan, senior director of product management at salesforce.com, dropped in this morning to update us on their hosted solution for customer relationship management (CRM) and related applications. “We’re seeing a lot of interest on Wall Street,” Tzuo said. “Commissions have dropped, to zero in some cases, so many firms are shifting from a transaction focus to a relationship focus.” Tzuo says the first wave of CRM implementations on Wall Street failed because the software was either too expensive and complex, like Siebel, or took the form of simple applications like ACT that were popular with individual relationship managers but offered too little in terms of security, backup and corporate control and support. Having salesforce.com run the application, including security and support, and deliver it to users’ desktops (for $500 per person per month), provides a middle ground that he says Wall Street firms are gravitating toward.

Northern Trust is winning a great deal of pension business from multinational clients on the basis of its tax-transparent cross-border pooling. To enable international companies to pool the assets of their pension funds from many countries without running afoul of the IRS, the firm developed a tax-transparent cross-border pooling solution in September 2005. In fifteen months, assets in the product have grown from 0 to $10 billion and Northern Trust is seeking a patent on its methods of handling this unique product.

Wasting no time reaching out to Microsoft Vista early adopters, Fidelity has released a Market Monitor gadget that Vista-using investors can use to keep an eye on their stocks. Gadgets are always-on mini-applications such as games, live webcams and traffic maps that can be downloaded free at www.gallery.live.com and sit in the miniature portal “Sidebar” section at the right of the Vista desktop screen. (Fidelity also offers its gadget at www.fidelity.com/beta.) The Fidelity gadget provides watch lists and stock charts similar to those at Yahoo Finance, but with Fidelity branding and graphics – stocks whose price has risen a lot, for instance, are shown in bright green, small price increases are darker green, black is neutral and stocks that are dropping are shown in various shades of red. Users pick any 25 securities to follow. For Macintosh users, Fidelity offers similar tools as a downloadable widget.

Today's Wall Street Journal provides a gruesomely fascinating account of Amaranth's final days ("Amid Amaranth's Crisis, Other Players Profited"). The mental image it conjures in the reader's mind is that of a pack of wolves, one of which has injured itself and lies dying of its wounds, the rest taking the biggest, juiciest hunks out of it they can while its heart still beats.

The Amaranth fiasco continues to affect the industry. In addition to the SEC's efforts to regulate hedge funds, the SEC, the Federal Reserve Bank of New York and the Financial Services Authority in London are investigating banks' and securities firms' lending practices to hedge funds.

The business intelligence movement rolls on and one of its targets/benefactors is Wall Street. It's a good fit -- after all, what buy-side or sell-side executive wouldn't want the most insightful views of the right pieces of data? In my first full week at Wall Street & Technology, I was briefed on three new or recently updated data analysis tools: one for analyzing the blogosphere for stock and company tips and rumors, one for analyzing SEC Edgar data, and one for portfolio backtesting. Here's what I found interesting.

Cory Levine, Wall Street & Technology

Boutique agency brokerage Miletus Trading, has integrated its algorithms, known as Strategy Engines and its Trade Impact Estimator into the Charles River Development Investment Management System (IMS). The move will allow Miletus to offer the buy side its algorithms through one of the industry’s most visible front-end platforms.

“Traders can now access Miletus pre-trade analytics and algorithmic trading strategies directly from the Charles River blotter,” explained Stephen Engdahl, director of product management for Charles River Development. “This relationship with Miletus expands the number of trading strategies, execution venues and supporting tools which Charles River brings together, enabling traders to effectively make decisions and implement trades.”

By Tim Clark, Wall Street & Technology

BNY ConvergEx Group , a provider of agency brokerage and investment technology solutions, recently launched Jaywalk 360, a research service designed to deliver in-depth analysis from its BNY Jaywalk Independent Research Provider (IRP) network.

By Tim Clark, Wall Street & Technology

In an effort to meet its rapid expansion in Scotland, UK-based Barclays Wealthrecently announced that it will create 500 jobs in Glasgow over the next three years.

By Tim Clark, Wall Street & Technology

Northern Trust today announced that it has won the mandate to provide custody services to the $320 million Oslo Pensjonsforsikring’s (OPF) global fixed income portfolio, managed by investment manager Rogge Global Partners.

By Tim Clark, Wall Street & Technology

Charles River Development, a provider of front- and middle-office systems to the global investment management community, recently announced the release of its new Web-based module, Charles River Anywhere. The new tool enables Charles River Investment Management System users to securely monitor and manage critical Charles River IMS information via any Web-enabled wired or wireless device.

By Tim Clark, Wall Street & Technology

SunGard and Advent Software recently announced the availability of STN for SWIFT to investment managers using Moxy, Advent’s trade order management system.

By Tim Clark, Wall Street & Technology

SunGard recently added unified managed account (UMA) capabilities to WealthStation, a wealth management technology solutions platform that helps financial advisors manage their high-net-worth clients’ assets.

By Tim Clark, Wall Street & Technology

In an effort to grow its business while streamlining its marketing, sales and client service processes, Harris Investment Management has tapped customer relationship management (CRM) services from Satuit.

By Tim Clark, Wall Street & Technology

Eagle Investment Systems, a Mellon Financial Company, recently announced that U.S. Bancorp Fund Services (USBFS), a subsidiary of U.S. Bancorp, the 6th largest financial holding company in the United States, has selected Eagle STAR to support its mutual fund accounting and reporting needs.

By Tim Clark, Wall Street & Technology

Denver Investment Advisors, an independent investment advisory firm, has deployed IMpower, SunGard’s application service provider (ASP) portfolio management solution, to support its global investment operations.

By Tim Clark, Wall Street & Technology

Northern Trust has been selected to provide global custody, investment mandate compliance monitoring and performance measurement services to China’s multibillion dollar National Social Security Fund (NSSF) — the first institutional retirement fund in China to invest overseas.

By Tim Clark and Ivy Schmerken, Wall Street & Technology

In the October issue of Wall Street & Technology, we explored the practice of commission recapture in the article “A Hard Act to Follow.” The catalyst for that story was derived from an insightful roundtable discussion that BNY Securities Group subsidiary Lynch, Jones & Ryan hosted with a handful of other commission recapture players. The general consensus from that meeting and in follow-up discussions indicated that commission recapture, while still a viable means to generate returns, would one day become obsolete, especially since players such as UBS and Goldman Sachs shuttered their commission recapture operations, deeming it an industry in decline.

By Tim Clark, Wall Street & Technology

Dow Jones & Company recently launched "Dow Jones Wealth Manager Web Services," a solution that matches stories, articles and features from sources such as Dow Jones Newswires and The Wall Street Journal to client-specific interests and holdings.

By Tim Clark, Wall Street & Technology

Memphis, Tenn.-based financial services provider FTN Financial Group (FTN) has selected SunGard’s Adaptiv to manage its OTC derivatives business activities with its clients.

By Tim Clark, Wall Street & Technology

Northern Trust recently announced that its Global Securities Lending program has been named the No. 1 lender in North America by borrowers in the 2006 International Securities Finance(ISF) Equity Finance Survey of Borrowers Rating Lenders. Northern Trust was also awarded the No. 1 ranking in multiple service categories recognizing its superior relationship management, connectivity and automation.

By Tim Clark, Wall Street & Technology

Financial services consulting firm Finetix recently announced its partnership with Cadence Capital Group LLC, a New York-based hedge fund specializing in options, aggressive long-short and delta-neutral strategies. According to Cadence cofounder Dmitry Babayev, the partnership was designed, in part, to avoid a hedge fund catastrophe of Amaranth-like proportions.

By Tim Clark, Wall Street & Technology

Mellon Asset Management has achieved significant financial savings estimated by Mellon to be worth $944,000 in infrastructure and software, and $377,000 in support in just two months following its implementation of the Pivotal Customer Relationship Management (CRM) solution.

By Tim Clark, Wall Street & Technology

As federal regulators begin to investigate the catastrophic blowup of hedge fund Amaranth Advisors—whose $6 billion in losses resulted from bad bets on natural gas futures—the industry at large is scratching its head as to why the fund adopted such a risky investment strategy to begin with. This begs the question: Could technology, risk management or otherwise, have prevented the Amaranth debacle?

By Tim Clark, Wall Street & Technology

In an effort to better manage its derivatives portfolio, UTI Bank has selected the RisKompass software solution from Pyxis Systems.

By Tim Clark, Wall Street & Technology

In an effort to bolster its wealth reporting capabilities, Securities America has armed its 1,800 financial advisors with WealthMonitor, a web-based application designed by Albridge Solutions. This recent deal signifies the growing need for wealth management providers to deliver more focused attention to their High Net Worth Individual clients.

By Tim Clark, Wall Street & Technology

The multi billion dollar Abu Dhabi Pensions & Benefits Retirement Fund has selected Northern Trust as its sole global custodian to provide investment risk and analytical services, including performance measurement and attribution analysis.

Standard & Poor's Capital IQ, a Web-based data tool designed for the financial services community, announced that its client base doubled to 1,500 since its acquisition by Standard & Poor's in 2004.

May 2008 Sun Mon Tue Wed Thu Fri Sat         1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Weblogs of Interest Dark Reading: Firewalled Chief Risk Officer: New Era of Risk Management InformationWeek's Blog Digest Parry Aftab, the Privacy Lawyer

Categories Wealth Management Archives May 2008 April 2008 March 2008 February 2008 January 2008 December 2007 November 2007 October 2007 September 2007 August 2007 July 2007 June 2007 May 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 August 2006 July 2006 June 2006 May 2006 April 2006 February 2006 January 2006