Markets Gravitate to Managed Services06.18.2013
Capital markets institutions are embracing managed services as a way to cut costs and focus on core competencies.
California Public Employees Retirement System (CalPERS), the largest public pension fund in the United States, has migrated to Charles River’s Managed Services for hosting, application management, FIX connectivity and real-time integrated data. CalPERS is also live on the Charles River Investment Management Solution Version 9 across its equity and foreign exchange operations.
The transition to managed services aligned with CalPERS’ business strategy to streamline its investment management infrastructure by outsourcing management of Charles River IMS and consolidating systems.
“CalPERS’ mission is to provide secure retirement and health benefits to our members,” said Janine Guillot, CalPERS chief operating investment officer, said in a statement. “Adding these services from Charles River is part of our work to update investment technology infrastructure across the organization and will help us increase the efficiency of our operations and processes. This saves us time and money, which allows us to more effectively work to achieve the outcomes that our members depend on.”
Infrastructure-as-a-Service (IaaS) and managed services is gaining traction among both buy side and sell side participants.
“While some top tier broker-dealers may see infrastructure supporting trading to be a competitive advantage, the fact is that much of this infrastructure is increasingly non-differentiating,” said Celent research analyst David Easthope in a report.
For example, Goldman Sachs is spinning off its REDI technology division, Easthope noted.
Broker-dealers have the choice of outsourcing hardware connectivity, algorithm back testing and development, execution as a whole, market data, quantitative functions, among others, he said. “Although thus step involves the loss of control, in can entail powerful cost reduction.”
Charles River is providing all day-to-day system management on behalf of CalPERS and is handling upgrades to ensure they are timely and seamless. CalPERS has a single, hosted solution for automated portfolio management and modeling, order management, trading, compliance and post-trade processing. The next phase of the project will automate CalPERS’ portfolio construction and order generation capabilities, eliminating the need for spread-sheets.
“Today’s technology is more complex, requiring specialized skills that many buy-side firms find difficult to recruit and retain,” said Tom Driscoll, global managing director at Charles River. “As a result, firms like CalPERS gain increased scale and immediate access to the latest capabilities and system expertise to support business challenges.”
Charles River announced that over 600 attendees from 18 countries participated in its 2013 Client Conference, held June 9 – 12 in Boston. The conference highlighted Charles River’s new operating model that helps buy-side firms improve business value, increase user satisfaction, simplify operations, and lower technology costs.
Buy-side firms are under pressure to leverage technology, introduce new products, and automate the investment process.
“Charles River has evolved from a software vendor to a provider of a hosted, enterprise solution for buy-side firms,” said Peter Lambertus, president and CEO of Charles River Development. “Our solution solves common challenges confronting buy side firms, including consolidation of systems, reduction of complexity and customization, poor data quality and increased regulatory requirements.”
CEO succession to be determined by the end of 2023.
Active ETFs have a 54% compound annual growth rate over the last three years.
Proxy voting expansion will cover more than 80% of eligible index equity assets.
For now, the firm emphasizes dynamic communication and agile decision-making rather than automation.
Hard work and innovation are necessary to differentiate execution.