BNP Paribas Securities Services has just completed the integration of the assets of New Star Asset Management into its client Henderson Global Investors’ investment operations. Colin Shapiro, head of client solutions at the bank, explains the data integration challenges faced during the process, especially with regards to the asset manager’s legacy service provider.
Henderson Group appointed BNP Paribas Securities Services as an exclusive service provider for its Henderson Global Investors’ investment operations and related banking services, excluding services for hedge funds, in February this year. The two firms have since been working together on integrating the assets that Henderson acquired when it bought New Star Asset Management in April.
Following the acquisition, Henderson Global Investors has created Henderson New Star, its UK retail business, which offers investors the combined offering of both groups with a focus on equities, fixed income, multi-manager, commercial property and sustainable and responsible investment. The integration of the middle office of New Star, which involved £7.6 billion in assets across 114 funds, including retail funds and institutional mandates, was completed in a period of five weeks, says Shapiro. Work is now in hand to onboard the fund accounting and related banking services mandates for these New Star assets.
“After completing the acquisition of New Star, Henderson was keen to integrate the middle office and third party functions from New Star into BNP Paribas Securities Services in an accelerated timeframe,” he elaborates. “The BNP Paribas Securities Services service went live within days of Henderson completing its purchase at the end of a transition of approximately nine weeks.”
The firm’s drivers to migrate speedily stemmed from concerns regarding potential degradation of service within the legacy New Star operation and to ensure the minimum of disruption to the investors in the New Star funds, he continues. “Having completed the integration onto BNP Paribas Securities Services’ middle office and position keeping platforms, Henderson was naturally keen to establish stable service for the New Star business as soon as possible, so that further fund and business integration could occur. Furthermore, once integrated, Henderson would be able to expand the business offerings in line with the servicing capabilities provided by BNP Paribas Securities Services. Rapid integration also permitted Henderson to harmonise asset management activity across the fund range,” Shapiro explains.
The project kicked off with an initial period of due diligence and planning, which lasted for roughly two weeks, he says. This then rapidly progressed to the identification of any specific service requirements of the new funds, the development and documentation of new processes to cover those requirements, and the requisite training and acceptance for new processes into the business. In parallel, IT development and testing for a range of new reporting requirements was required, and BNP Paribas Securities Services worked closely with the outgoing third party administrator to plan the detail of migration procedures, including static data set-up and standardised file formatting for data exchange and take on. “With limited time available, a single ‘dry run’ migration was possible before the business was taken into the live environment over the Easter weekend,” he continues.
The synchronisation of data with the legacy service provider is the major data challenge in advance of such an integration project, adds Shapiro. Foremost amongst these were the synchronisation of asset data, ensuring that assets are accounted for consistently, for example accruals and paydown schedules. It was also in ensuring that valuations and pricing treatment were consistent, such that the migration does not materially alter the reported value of the portfolio, and that market facing data, such as special or standing instructions and matching acronyms are fully set up, and that corporate actions treatment is consistent.
“From a positional data point of view, it is clearly important to understand in great detail the nature and treatment of data taken on from the legacy third party administrator – such that data could be transferred onto BNP Paribas Securities Services’ own accounting systems in a way that accurately reflected its treatment and representation in the legacy environment,” he says.
The data related efficiencies achieved in this process have been numerous, claims Shapiro. “From a client’s perspective, Henderson has been able to integrate the New Star funds onto its standard servicing model from BNP Paribas Securities Services and its own front office technology. That means consolidated use of data vendors for their legacy and new business, such as pricing. It means the consolidated delivery of positional data every night into its portfolio management systems. And it means consolidated and consistent delivery of periodic data, for example from which client reporting and performance are measured,” he concludes.
BNP Paribas is itself engaged in a project to review its own data vendor contracts internally and create cost savings and efficiencies in light of the current financial climate. The bank has been working on the data vendor feed assessment since earlier this year and hopes to complete the work before the end of 2009, although the project has somewhat been impacted by the merger with Fortis in May.
The French headquartered bank has been reviewing the number and quality of data feeds it has been receiving across its operations as a whole, with a view to rationalising the number of these. Andre Kelekis, head of global market data strategy at BNP Paribas, will likely be discussing the progress so far at this year’s FIMA in November.