The State of Wisconsin Investment Board (SWIB) has embarked on a major project to integrate and normalize the data used by its portfolio managers to run their investment models and to verify custodians’ reports on the performance of its external managers. SWIB is implementing Eagle Investment Systems’ Eagle Reference Manager platform at the heart of a new data and portfolio management solution designed to streamline its management of the $65 billion Wisconsin Retirement System Trust Funds, the ninth largest public pension fund in the U.S.
For SWIB, the project is “the most significant infrastructure initiative for the next two years,” says Ken Johnson, chief operating officer. Work is scheduled to begin in earnest this summer, when a detailed implementation plan is completed. Phase I is expected to take between 10 months and a year; access to deeper levels of data will be attained through a second project phase.
The contract is a significant win for Eagle. As a major buy-side institution, SWIB pursues a passive investment strategy, tracking major market indices in both equities and fixed income securities. The deal also reinforces Eagle’s strategic efforts to sell into the North American public fund, plan sponsor and endowment marketplace. The company already counts Oregon State Treasury, Ontario Public Service Employees’ Union Pension Trust and Pennsylvania State Employees’ Retirement System among its clients.
Under the arrangement, Eagle will furnish SWIB with a set of management systems and applications, including the Eagle Pace data hub and portfolio management system, the Eagle Performance investment performance measurement suite, and the Eagle Portal web-based information delivery platform.
Pulling this suite of Eagle systems together is the Eagle Reference Manager, which will help SWIB manage and reconcile the various data sources it uses. The system will allow SWIB to take a more data-centric approach toward simplifying its internal data management process.
Johnson says the project stemmed from a strategic IT plan developed five or six years ago. The objective was to create a central point for gathering data for internal analysis.
SWIB manages half its 40 or so portfolio internally with the rest managed by external firms, primarily Barclays Global Investors. It uses three custodians – Barclays, Mellon and a smaller operation – and wanted to create a data environment that would allow it to verify performance data calculated by its custodians. It currently received month-end valuations, and one of the objectives of the project will be to increase the frequency of this performance data.
In addition, says Johnson, SWIB was looking for an efficient tool for aggregating reports on holdings from BGI and Mellon on a normalized basis. Finally, SWIB’s portfolio managers rely on Excel spreadsheets for many of their modeling requirements. Johnson says that while this will remain the case, the data project will ensure that managers’ spreadsheets are reconciled properly.
To make sure the specification for the project was right, SWIB developed an internal prototype for the data hub two years ago, Johnson says. On the basis of that work, the firm decided that the scope of the project required external help. It identified Eagle as a supplier based on its “proven product” offering, and on SWIB’s existing relationship with Mellon, which Johnson says gave Eagle an advantage over potential rivals. With Mellon as an owner, Eagle has first-hand knowledge of Mellon’s processes.
As well as the custodian’s performance reports and portfolio managers’ spreadsheet data, the data hub will use external market information sources, which are yet to be determined by the final implementation plan. Johnson says that index data will be used by the system to handle vector holdings analysis. SWIB’s portfolio managers currently use market information from Bloomberg and Wilshire. Johnson says he doesn’t expect the new set-up, including the Eagle Pace portfolio management system, to replace the existing systems, but will rather complement, integrating and verifying data for SWIB’s managers.
The Eagle Reference Manager platform works by consolidating data from various operational activities and external sources to create a centralized approach to data normalization and distribution. In the first stage, security master files are delivered to the Eagle Reference Data repository, where user-defined business rules are applied to define and build security reference records. The records are then scrubbed and validated based on a three-tier validation schema defined by the user firm. Once approved, records are then disseminated to downstream applications. Any exceptions are queued, repaired, revalidated and then re-disseminated downstream.