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Investment Manager Ditches Macgregor For Charles River

Looking to upgrade its compliance capabilities, Hotchkis and Wiley Capital Management moves to Charles River Development.

Hotchkis and Wiley Capital Management, an institutional-equity manager handling $4 billion in assets, recently decided to move off Macgregor's Predator and onto the Charles River Trading System for its portfolio-management needs.

The switch was motivated by a desire to gain better compliance functionality in the trading process by using Charles River Development's ComplianceMaster, a product described by David Lara, director of information-technology services with Hotchkis and Wiley Capital Management, as "one of the premier in the industry."

The opportunity for Hotchkis and Wiley to hit the market and examine its options came when Macgregor attempted to upgrade the firm from Predator to the Macgregor Financial Trading Platform. "The upgrade they wanted was significant in our minds," says Lara. "With the kind of effort it would take us to move from the system we were using to the new environment, it would be just as easy to look at a new trading system."

So, with an eye to compliance, Hotchkis and Wiley did just that. An initial list of potential vendors, which included Advent, Eze Castle Software, Financial Models Company, Bloomberg, Charles River Development and Macgregor was shortened to the latter four. From that list, Charles River Development was selected. "We did not choose the cheapest product but the one that fit us best," says Lara.

In addition to enhanced compliance functionality, which Lara says is being acquired more in a proactive spirit then in response to specific regulations, the Charles River Trading System will allow Hotchkis and Wiley to interact with its sell-side counter parts using the Financial Information Exchange (FIX) protocol, something the firm did not do with Macgregor. Currently, Hotchkis and Wiley interacts with about 40 broker/dealers and expects to be communicating with 15 of them using FIX by the end of the year. That, according to Lara, will help reduce the firm's failed trades and manual-exception processing.

These moves are part of a concerted effort by Lara to bring the focus of technological enhancements out of the back office where portfolio accounting is king and into the front office. "Whatever businesses or products we get into, I want to trade on one system and leverage Charles River for whatever we need," says Lara.

Now, the Charles River Trading System will flow trades into Hotchkis and Wiley's accounting system -- FMC's Pacer. The firm also uses FMC's Sylvan product for performance attribution and Pages for client statements.

As efforts to increase straight-though processing at Hotchkis and Wiley continue, the firm also plans to work with Omgeo. Lara says the firm is in talks with Omgeo to automate some aspects of its post-trade operations. Specifically, Omgeo's Oasys will allow Hotchkis and Wiley to automate the communication of allocation information to its broker/dealer counter parts.

Implementation also proved to be a major issue as Hotchkis and Wiley needed to be on a new system before Sept. 1 when its contract with Macgregor expired. The firm wound up going live on Charles River about 10 days before the deadline after running both systems in parallel mode for about two weeks.

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