Derivatives pricing and risk analytics provider Numerix has deviated from its normal partnership practice to license source code, development rights and unlimited distribution rights for its Portfolio risk product to Paladyne Systems, the investment management solutions firm within sell-side specialist Broadridge Financial Solutions. As part of the deal, Paladyne has also taken on the Toronto- and Hong Kong-based Numerix development teams that built and support the Portfolio risk product.
Paladyne has integrated Numerix Portfolio risk into its front-office suite to offer a single and complete front-office portfolio management platform. The risk component of the platform is available immediately and, so far, one hedge fund has signed up and is testing the product.
Paladyne has also rebranded Numerix Portfolio and is offering it as a product named Risk Master to both Paladyne buy-side and Broadridge sell-side clients looking for an enterprise or departmental solution to support alpha generation. Risk Master is available immediately and will also be integrated into Paladyne’s hosted investment management solution. The hosted solution will be brought to market in the next three months. Numerix will also continue to develop and market Portfolio.
A final strand in the partnership between Numerix and Paladyne, which builds on Paladyne’s use of the Numerix CrossAsset analytics platform to value portfolios in real time over the past four years, is a standard licensing arrangement for Paladyne to use CrossAsset analytics as a primary source of risk analytics for both its extended enterprise and hosted solutions.
Paladyne and Numerix say these arrangements will not put them in competition with each other, but rather will leave each vendor to develop Portfolio in its own way.
Stephen O’Hanlon, Numerix CEO and president, explains: “We will both be delivering different risk solutions. There is no constraint on how Paladyne develops Portfolio. Numerix focuses on counterparty credit risk, while Paladyne will be using the software for its investment management platform.” On the company’s partnership with Paladyne, he says: “We have numerous companies in our partner network, but this is the first time we have made an agreement on source code. Our relationship with Paladyne is unique and I don’t expect to share source code again.”
Sameer Shalaby, president at Paladyne, says it took about a year to develop and integrate Portfolio into the Paladyne technology stack. He explains: “We had been looking for a partner for risk for several years as our clients asked us to add risk to fill out our suite of investment management systems. Before the Numerix deal, we had no scenario testing capabilities and our clients had to use third-party solutions. Now we can offer pricing using Numerix CrossAsset and real-time stress testing using Paladyne portfolio risk software.”
He adds: “Data quality is one of the most important factors n the effectiveness of risk decisions. The combination of order management, portfolio accounting and front-office risk management with reference data provides a complete solution that will lower costs and help clients focus on growth.”
Neither company will disclose the number of Numerix Portfolio development employees in Toronto and Hong Kong who have transferred to Paladyne, but O’Hanlon says employees were given the choice of staying at Numerix or moving to Paladyne and that while Paladyne now has enough developers to evolve the product, Numerix has retained some to work on the product for its own customer base.
Says O’Hanlon: “Paladyne’s ability to integrate Numerix Portfolio and CrossAsset into its offerings, and Broadridge’s global client base, provide an opportunity to expand our product footprint, while enabling us to align more resources to the development of our risk scenario and calculation platform.”
Reflecting on Broadridge’s acquisition of Paladyne back in September 2011, Bennett Egeth, senior vice president, concludes: “This agreement supports the strategic vision to offer Paladyne products and solutions to Broadridge’s client base.”