Threadneedle Asset Management is implementing the Eagle Investment Systems performance measurement solution, based upon the foundation of a centralised source of consolidated reference data created using Eagle’s Pace data hub and portfolio management system.
Following a project kicked off in Q1 this year, the investment manager has achieved compliance with the CFA Institute’s Global Investment Performance Standards (GIPS) using Eagle’s GIPS composite management module, and will go on to implement additional performance and client reporting functionality provided by the vendor, at each stage leveraging its earlier data streamlining efforts.
The fact that Threadneedle has consolidated its data is also easing the process currently under way to outsource its investment operations to JPMorgan. “Threadneedle is at the very beginning of that project,” says Jenn Wilson, managing director of Eagle’s London office. “The way they have used Eagle to consolidate data facilitates their ability to isolate themselves from dependency on a specific accounting system. They can accept the same type of data from an alternative solution without upsetting the composites, the performance measurement or client reporting, whether that is another in-house (accounting) solution or an outsourced (accounting) solution.”
In 2003 Threadneedle decided to create a single distribution platform to deliver corporately shared data through centralised and standardised processes, and selected Eagle Pace, Eagle Reference Manager, Eagle Message Centre and Eagle Portal to support that strategy (Reference Data Review, November 2003). The firm’s aim was to pull in reference data from vendors such as Bloomberg, scrub it and provide it to downstream systems, as well as consolidate it with data from its accounting system.
According to Dave Carter, Threadneedle’s head of IT architecture, the reference database inside Eagle Pace covers both equity and fixed income instruments. This data is fed into the firm’s front office LatentZero system and into DST International’s HiPortfolio in the back office – though that will change following the lift-out by JPMorgan. “The data is also fed into an existing engine for stock level performance attribution, which is also the current ‘calculator’ of performance returns until such time as this process moves towards Pace Performance,” Carter says. “The Pace database also contains a level of analytics data, portfolio information which helps support our distributors (with product data), and the client benchmarks which are also fed into the surrounding systems and processes.”
Wilson says at the inception of the relationship between Eagle and Threadneedle, Eagle’s capabilities, including performance, were discussed in detail. The goal was to lay the foundations by putting in place a data hub/warehouse, integrating the data and enabling validation of reference data. “They felt strongly that beginning with consolidated, cleanly formatted data was key,” she says. “Once the foundation was in place, they were in a position to build upon the capability. We began talking in earnest about performance and client reporting mid last year. We did a proof of concept, using Threadneedle’s data, of our performance measurement and attribution and client reporting functionality, and came to a formal agreement to move forward at the end of last year.”
Threadneedle’s decision to imple-ment Eagle Performance for GIPS reporting was a “pragmatic” one, Carter says, linked to what the firm has achieved with Pace during the past three years – “namely improvements to data management and establishing a repository for portfolio holdings”. “GIPS compliant reporting is important both for servicing existing clients but also new clients and their intermediaries,” he says. “We wanted to take a mid- to long-term approach and look at providing not only GIPS compliance but a platform which strengthens our broad performance proposition and support to internal business units and clients.”
Capitalising on Pace as a source of authorised and clean data, Threadneedle wanted to make improvements to the service delivery of performance related outputs. “For example, the performance desk at Threadneedle responds to requests from internal clients to provide performance data in many different ways, against various benchmarks, to present to external clients and new prospects,” he says. “This activity can be time insensitive, so one proposition for using Eagle performance and reporting is to provide an internal self-service approach to the most regular requests, leaving the performance desk to concentrate on more complex scenarios and requests.”
To implement Eagle Performance for GIPS compliant reporting, without first having an Eagle infrastructure in place, would be fairly straightforward, Carter says, simply requiring returns data and history to be loaded. “This was the first tranche of what we achieved. Then to actually calculate the underlying returns via Eagle Performance, we will be reusing the infrastructure that has been built to date, that provides the consolidated view of funds, portfolios and their holdings and transactions.” Future business processes will be further simplified by using a range of “internal” unit prices calculated solely for performance measurement purposes. “This will help the performance desk avoid data quality tracking if this activity has been performed upstream of the performance desk processes (in this case our new service provider JPMorgan) and is reflected in “signed-off” prices for performance usage.”
Improved client reporting is the end goal at Threadneedle, he adds. Having established a single location for performance returns, valuation data supporting the returns and the underlying reference data in Pace, the firm has a central universe of most of the data required for institutional client reporting. It hopes to improve the service delivery of that data into its existing reporting capability, currently based on a combination of desktop publishing and content management tools. “What we will have achieved will be improved efficiency and scalability of getting the data into a complex reporting process with an ability to scale and meet new client and intermediary service levels,” says Carter.