The buy-side industry has long been lambasted as technologically inferior to its sell-side brethren, slow to adopt new systems and processes, content with the way things have been done for years. Yet, if 1999 was an indication of things to come, money managers are catching up. From the proliferation of order management systems with FIX connectivity to various Internet plays, the buy side has amply prepared itself for the millennium.
Only 12 months ago the order management system was seen as a value-added rather than a necessity, but in that short time, investment managers have been buying them up like they're going out of style. Buy-side powerhouses like Barclays Global Asset Management and Dresdner RCM Global Investors elected to use the Longview Group's Landmark while others like Amvescap have chosen The MacGregor Group's MFTP.
The MacGregor Group's May acquisition of Merrin Financial from ADP helped vault it into its position as the number-one provider of order management systems (WS&T, 7/99). Back in January, then-CEO of Merrin Financial, Thomas Conley, vowed by this time next year the firm would be trimmed down and prepared to attack the European market, a new face for the old guy on the block (WS&T, 1/99). He wasn't kidding. Since the Merrin acquisition, MacGregor has continued to sell both Predator and MFTP, and has forged a lead in creating "intelligent" links to ECNs that will provide buy-side traders with more automation to work their orders.
Toward the end of the year, Longview-formerly owned by Barclays Global Investors-was purchased by the TenFold Corp (WS&T, 12/99). Why did Barclays sell Longview only a year after it purchased the company? Industry watchers contended that some of Longview's clients were upset with its being owned by a large, multinational competitor. Others claimed that Barclays had intended to use Landmark as the front end to a proprietary crossing network, and sold the company when those plans died.
And, 1999 was the year that the order management vendors began to see some heady competition from the traditional back-office system providers like SS&C Technologies, DST International and Advent Software, all of which boast a complete front- to back-office architecture, one they hawk as the answer to straight-through processing. Despite these advances, larger firms are still leaning toward the best-of-breed approach, content to integrate their disparate front- and back-office systems through middleware, while the smaller ones, with less resources and time, buy the whole system from one vendor.
Take a look at Prudential Global Asset Management. Beginning a complete reorganization and consolidation of its systems in May, the firm decided it would be best served with two order management systems-Landmark and Bloomberg-as well as a couple of recordkeeping and portfolio accounting systems. And that was after the consolidation! As Michael Garito, PGAM CIO, said at the time, "We've taken a best-of-breed approach because vendors with robust recordkeeping systems tend to have weaker performance measurement."
Speaking of STP, the FIX protocol came on strong in 1999, almost becoming what it has portended to be: a standard. But, with so many vendors out there selling their own FIX flavors, the International FIX Committee has charged a working group with selecting a third party to serve as a certification agency. No agency has been named, despite plans to have the process completed in October, but a group of companies, lead by the Open Group, a non-profit consortium that specializes in testing and certifying computer protocol, was named as a contender.
Then there was the Internet. Money managers caught on to the craze like no other industry, posting real-time account data on the Web, offering extranet applications for traveling managers and online financial-planning tools. Direct-sellers like mutual fund company The Vanguard Group released online financial-planning tools, while others like Nicholas Applegate revamped their entire sites to accommodate their changing business (WS&T, 7/99). Larger firms with various money management divisions, like Liberty Financial, sought to streamline their businesses through a single site.
All in all, in 1999, technology empowered and elevated the buy side to unimagined heights.