Fund administrator GlobeOp Financial Services has signed a deal with Standard & Poor’s Valuation and Risk Strategies business (what was known as the Fixed Income Risk Management Services or FIRMS division until recently), under which the ratings agency’s subsidiary will provide GlobeOp with valuations for a range of fixed income securities. Jon Anderson, global head of Valuation and OTC Derivatives at GlobeOp, explains that the administrator chose S&P because of its size and importance within the fixed income valuations arena. The deal is all part of the fund administrator’s wider goal of providing evaluated pricing data aggregation services to its customer base.
The firm will now receive fixed income, structured finance securities and syndicated bank loans pricing data from S&P’s Valuation and Risk Strategies in order to be able to distribute the data over its proprietary platform to end clients. GlobeOp already uses a number of sources for pricing data, including getting raw pricing data straight from the market, but the firm selected S&P because of its fairly comprehensive coverage of the fixed income markets, notes Anderson.
“We are driven to add new sources of pricing data by our clients and the particular client base for evaluated pricing services is much wider than our traditional hedge fund clients. Mutual and pension funds, insurers, institutional investors, banks and proprietary traders are all interested in receiving this data,” he adds.
Rather than tackle the challenge of modelling and interpreting pricing data itself, the fund administrator has instead opted to act as a data aggregator for its clients. Anderson indicates that the benefits for its clients are that the costs and risks are much lower for them to outsource this function to GlobeOp instead of keeping it in-house. “We vet the vendor data feeds we receive on behalf of our customers and put a series of controls around the validation process to drive down risk,” he explains.
Clients are keen for independent testing of asset prices, he continues, and GlobeOp therefore strives to independently apply clients’ valuation policies through controlled processes, providing the consistency and transparency that both portfolio managers and investors require.
For S&P’s part, Anderson indicates that the deal will provide the vendor access to GlobeOp’s customers and increase its scale. Frank Ciccotto, senior vice president, S&P Valuation & Risk Strategies, adds: “S&P’s independent valuations, coupled with our ability to add the assumptions we use to derive them, offers GlobeOp’s hedge fund and institutional clients an added level of transparency and understanding.”
The data integration process has been relatively simple for GlobeOp, as it involves what Anderson calls a “call and response” process, where the firm sends out a request for the data needed and it is provided on a daily basis from an FTP site. GlobeOp then puts the data through tolerance and verification tests, before it is sent through to its clients. This is where Anderson believes the main value add is for customers: “It is about the numbers but it is also about the service provided alongside those numbers. We go through the extensive process of tolerance testing and have analytics around those tolerances, as well as providing reports on data consistency.”
This data aggregation and validation work is coupled by the fund administrator’s wider accounting services offering in order to act as a one stop shop for meeting a firm’s evaluated pricing needs, concludes Anderson.
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