Ever-acquisitive SunGard has snapped up yet another small vendor in its bid to get in on the data quality and validation solution investment action going on within the buy side. Doug Morgan, president of SunGard’s Institutional Asset Management business, explains the details of the ValueLink acquisition to Reference Data Review.
Morgan indicates that the discussions between the two parties began several months ago and were sparked by an interest on the part of SunGard to get into the validated data solution space, in which it previously has not been present. “In terms of what prompted the acquisition, we’ve come to recognise that the financial crisis has heightened the emphasis on data transparency and disclosure across the buy side,” he explains. “We have seen that translated into an industry focus that is reflected in the investments that are being made by asset managers and fund administrators in the implementation of data management solutions.”
Certainly, other vendors in the data management and cleansing solution space have noted an uptick in business as a result of a regulatory focus on data quality and transparency in the market and have invested in their solutions accordingly. Impetus to invest is being driven by the fact that regulators such as the UK Financial Services Authority (FSA) and the US Securities and Exchange Commission (SEC) have been making noises about the importance of the data underlying risk and pricing calculations and are asking for greater transparency from all parties in the financial markets to this end.
In terms of the smaller vendor’s credentials, Morgan believes it sits nicely within this broader industry trend by offering services for data validation in pricing, corporate actions and counterparty collections. Using a managed data service model, it collects and consolidates pricing and corporate actions data from numerous sources, and performs six levels of quality checking, including inter-vendor and client specific price analyses. ValueLink’s last public client win was Sharefunds in November last year, which opted for the price validation and corporate actions service in order to support its midday valuations, for example.
“The area of security price validation in particular is something that we recognise to be a specific hotspot, as firms look to reduce the level of risk they face in validating prices from alternate sources,” explains Morgan. “It is a form of risk mitigation in the fund valuation process that comes with its own costs and complexities.”
This trend towards multiple validation and checking of pricing data is, in fact, a trend that A-Team highlighted in its valuations benchmarking report, which was released in October last year. In December, the UK FSA also published a report highlighting the buy side’s valuations and risk management practices, which noted the implementation of independent pricing processes and validation checks at all of the 12 firms it surveyed.
Turning back to the acquisition, Morgan reckons that the services delivered by ValueLink are “unique in the industry” and provide a function that most asset managers and fund administrators currently manage in-house. “We feel that those services have applicability beyond the UK and Ireland market that ValueLink has historically focused upon. We also felt that it would complement SunGard’s particular strengths in the area of investment operations and some of our solutions that support the needs of the buy side,” he continues.
To this end, ValueLink is being added to SunGard’s Asset Arena portfolio of solutions, which provides accounting and operational support for mutual funds worldwide. In the scheme of SunGard’s rather complex operating model, ValueLink will therefore become part of SunGard’s Asset Management business, but will continue to be led by Stephen Choate, who is currently CEO of the smaller vendor.
Further down the line, Morgan indicates that SunGard will look to invest in data integration with these investment accounting solutions, and those that rely on validated pricing data for the production of fund net asset values (NAVs) in particular. It will also explore other leverage opportunities with other SunGard solutions that rely on validated data (perhaps the Fame and MarketMap brands will feature in this endeavour).
“From a branding perspective, it is likely we will not make any immediate branding changes, but over time, we feel the branding should reflect the complementary nature of ValueLink and its integration with SunGard’s other solutions that are used by asset managers and administrators,” he adds. “We would therefore ultimately expect ValueLink to be included under the Asset Arena brand.”
Morgan says that ValueLink customers today should really recognise no changes: “But obviously SunGard is a global firm and our presence in investment operations means that we think ValueLink could be extended into other markets. Customers can expect to see ValueLink well positioned to provide its services globally.”
He notes that the acquisition provides SunGard with a new offering that is very different from what it has today and hopes that this will allow the vendor to service its customers by improving internal operational efficiency and increasing the overall level of control and transparency they have over the securities pricing process. “The combination of our customer reach and global presence will enrich the services that ValueLink is able to provide. I also expect to see the continued evolution of ValueLink’s processing platform under SunGard ownership,” he says.
Morgan indicates that SunGard has maintained a strategic commitment to deliver software solutions to customers that increase operating efficiency and control by using its own business process management technology. “We will therefore look to leverage this technology, the Infinity Process Platform, to provide further automation and increased transparency to ValueLink’s customers,” he elaborates.
As for future acquisitions, as ever, these are not ruled out in the data space: “It is fair to say that acquisitions have been a part of SunGard’s strategy since its inception and we will continue to be acquisitive where it makes sense. We may pursue acquisitions to fill gaps in our product offerings or to address growth opportunities in the market. These decisions are balanced with our significant ongoing investments in the development of new solutions and the enhancement of existing ones.”