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Impact Investing

IPE special report May 2018

Sections

Software houses target pensions

The big spenders on the sell side have, over the years, attracted most of the attention of financial software developers. Although there are a number of buy side technology specialists, there are nowhere like as many serving the banks and brokers. But things are beginning to change, and over the past year there was a marked increase in new applications for asset managers, pension funds, hedge funds and others.
London-based financial software specialist ACT Financial, a subsidiary of the UK software giant Misys, symbolised this process when it split itself into two separate units – Misys Securities Trading Systems and Misys Asset Management – in October. The latter unit supplies front to back office applications for institutional and private asset managers, as well as offering consultancy services. Misys cited the “worldwide increase in private pension provision and the increasingly global approach of investment managers” as key reasons for creating a company dedicated to buy side technology.
Spotting an opportunity in the little computerised hedge fund market, London-based analytics and data management technology supplier Xenomorph Software launched a trading and risk management system called PerfectVine. This supports trade capture and position keeping for a wide range of instruments, as well as strategy analysis, profit and loss calculations, risk management and reporting. Its risk analytics cover market, interest rate and credit risk, yield curve analysis, scenario simulations and what-if analysis of trades. A key feature of the system is its “scalability” – a hedge fund can start with a small implementation and expand the system as its business grows, says Brian Sentance, managing director of Xenomorph.
New York-based data and data management technology supplier, Fame, recently launched the Fame Internet Data Service (FINDS) aimed at hedge funds and smaller buy-side firms. The centrally hosted warehouse of financial and energy market data is accessible via the internet and firms can customise how they receive the data to their own requirements.
New York-based Askari and California-based Barra are two companies that have taken risk management technology originally created for banks and adapted it for the buy side. Among the features which Askari added to its TruView system recently are pre-settlement credit risk management, parametric value-at-risk and performance attribution. It also introduced a comprehensive proxy manager that allows users to set proxies to yield curves, instruments and asset classes. TruView is available for installation in-house or as an online application services provision (ASP) with automated data integration.
Barra plans to release a version 4.0 of its TotalRisk system early this year. This will feature a framework that integrates optimal local equity and fixed income models into robust global models that will allow users to analyse a global mix of positions spanning more than one country while simultaneously making use of the best possible country-specific modelling. Barra supplies its system with analytics as well as market data, prices and terms and conditions.
A number of analytics specialists upgraded their software over the past 12 months. Following its take-over by Financial Times Interactive Data, Los Angeles-based CMS BondEdge made a number of enhancements to its BondEdge fixed income portfolio analysis system for its introduction to the UK. New features include the ability to classify portfolio holdings as either domestic or foreign based on the portfolio’s base currency and support for a number of new securities and global indexes such as German bunds and UK gilts. The company plans a number of further enhancements for this year.
London-based Bita Plus Consultants has re-engineered its portfolio analytics and optimisation software. Now called Curve and due for release in March, the application will include risk reporting, optimisation, backtesting and performance attribution. Ease of implementation and use will be key features, says the company. Curve will work with the company’s recently released Monte Carlo simulation module. The company also supplies equity quantitative research, investment management and portfolio trading, and hedge fund management modules, and offers factor analysis and portfolio risk and performance attribution analysis outsourcing services.
Several technology suppliers besides Askari have latched on to the ASP model as a way of making their analytics and trading software, originally developed and priced for the sell side, accessible by the buy side. The ASP approach avoids expensive installation and maintenance fees and allows users to rent the software online on a monthly or per-use basis. Egar Technology and Imagine Software, both based in New York, and Reech Capital, based in London, all now offer their analytics and trading applications in this way.
Copenhagen-based SimCorp has always focused on institutional investment managers and has recently made a number of enhancements to the fixed income analytics of its TMS2000 integrated treasury, portfolio and risk management system, including adding key rate duration, switch and scenario analysis, the calculation of expected tracking errors, and new optimisation techniques. It has extended the system’s calculation routines to cover performance measurement, such as fixed income performance attribution and geometric measurement. Other features added to the system recently include Monte Carlo and historical simulation and a design tool for asset and vanilla swaps.
In the realms of research, there were a number of moves to make information more accessible and tractable to investigate. One of the problems is the lack of standardisation in the format of research reports, which makes it difficult to automate searching, collation and aggregation of data. Many firms use the Portable Document Format (PDF) to make their reports available online. While this enables firms to maintain all the graphical and design features of printed materials, it is not amenable to word or concept searching because the text is held as an image. To overcome these problems, the RIXML.org industry consortium released version 1.0 of the Research Information eXchange Markup Language (RIXML) in June, which provides formal specifications for the presentation of equity research.
One of the consortium members Researchsummary, based in Buckinghamshire, England, recently released a package of tools and online services for accessing and analysing Web-based information. The tools provide for searches across a number of databases with a single query, the ability to make comparative analysis of multiple broker reports and other features.
Meanwhile, Netherlands-based Q-go has applied advances in natural language comprehension and other intelligent computer techniques to simplify the process of navigating financial information. Merrill Lynch Investment Managers has implemented the technology on its online pension programme Web site. This enables defined contribution and stakeholder pensions customers to ask questions in plain English when visiting the firm’s Web site. The software can interpret complex sentence structures and understand colloquial expressions as well as pensions business jargon. Q-go has adapted its technology for a number of European languages, such as Dutch, German and Spanish.
JP Morgan Investor Services is also exploiting the Internet to improve facilities for its customers – in this case its custody clients. In December, it introduced a service called Follow the Sun that links its support centres and automatically routes customer’s calls to the appropriate location for the time of day.

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