In a deal to outsource part of its IT infrastructure, Mondrian Investment Partners signed with Macgregor to use the Boston-based vendor's Macgregor XIP Post-Trade (MPT) platform. After completing a management buyout (MBO) in September, the firm assessed its legacy electronic trade confirmation and electronic trade delivery capabilities, according to Jason Andrews, investment administration manager with Mondrian. "The business has grown from approximately $28 billion to $38 billion in assets under management since the MBO, so we wanted a solution that would allow us to be volume insensitive going forward," says Andrews.
London-based Mondrian will access MPT on an application-service-provider (ASP) basis. The investment manager will decommission its existing trade delivery software, which is an early version of COR Financial Solutions' Salerio product, replace its stand-alone OASYS Global workstation and ultimately retire the firm's internal SWIFT infrastructure, with all functions managed through the MPT Internet portal.
Implementation will take place in three phases. Phase 1, currently in progress, involves migrating reconciliation messages for both cash and securities to MPT. The migration is scheduled to occur before May, notes Andrews. "The beauty of the ASP model is Macgregor becomes responsible for looking after the infrastructure," he says. "So the idea is we run the reconciliation messages through the service bureau and save ourselves having to do any of the SWIFT upgrades."
Phase 2, which will be completed in June, will move the trade delivery and trade confirmation process to the MPT service bureau, as well as third-party notification via SWIFT. And Phase 3, to be finished a few weeks later, will cover third-party notifications via other media, such as fax and e-mail.
Mondrian considered a number of providers - which Andrews declines to specify - before picking Macgregor, in large part because of its ASP capability. "We have control of the process and access through one portal over the Internet," says Andrews. "We also have the benefit of being able to get our SWIFT infrastructure and reconciliation messages flowing through the same process."
Andrews expects the move will create cost savings - particularly in IT development and maintenance, and from reduced SWIFT and Omgeo Central Trade Manager charges by piggy-backing on the Macgregor service. But, "Until we have installed the process, we won't be able to see and calculate those savings," he notes.
The chief advantage of this kind of deal is that it outsources a lot of the connectivity challenges an asset manager faces in communicating with custodian banks and broker-dealers, according to Tim Lind, senior analyst with TowerGroup, a Needham, Mass.-based research firm. "A major part of an asset manager's expense in administering a back office is the communication with its diverse universe of agents and banks," he says. "With this service, you can build one connection to the Macgregor infrastructure, and Macgregor uses the connectivity they have already established with banks and brokers to capture data from them, normalize it and distribute it in one format back to the buy-side firm."
Lind believes communication infrastructure will be the No. 1 component asset managers will outsource going forward, driven by regulatory requirements to ensure that firms understand where their transactions are, what their positions are and that portfolio valuations are in order. "With that type of scrutiny, how we communicate with our agents and how accurately we capture data is going to be a capability every buy-side firm needs."