When Chris Dawson managed investment funds at JPMorgan, he had to pull together information from 29 different systems. He used different applications for allocating assets, choosing stocks, assessing fixed-income products, overlaying currency effects and looking at increasingly complex derivatives. Oh, and he had to piece together price and index data from Bloomberg and Barclays Capital, as well as other tools for creating benchmarks or managing risks.
That showed him how fragmented-you might say, messy-a fund manager's desktop can be, as digital services proliferate.
Now, Dawson is in charge of ending all that fragmentation. He is the business development manager at Odyssey Financial Technologies, a Swiss company specializing in front and middle-office software that is trying to break into the United States with its asset management products.
His charge: consolidate all the functions facing a fund manager into a single, integrated picture on his or her desktop screen. Either build, in-house, all the capabilities needed to figure out fund performance, where to move money next and calculate the impacts of market events that a manager might expect to happen over a given horizon, or figure out how to incorporate other evaluation programs and data feeds, in a smooth, unnoticeable fashion.
"What makes us different is we have started and concentrated on the fund manager's desktop," Dawson said. Meaning: The analytical and risk management functions are not bolted on, as time progresses, to what started out as some sort of order management system.
"And we operate very much from the philosophy of the 'circular life cycle,' the ability of managers to analyze their funds against benchmarks, against models and against other funds," he said.
The product that Dawson is developing is called Investment Manager. The software is built, from the start, with pieces in its engine that allow fund managers to replicate the construction of the most complex of investments: asset-backed and "structured" products. By comparison, Dawson contends, analyzing performance and risks of equities is a far easier task.
The technology was acquired three years ago, when Odyssey purchased Cafit Limited, which specialized in providing software that helped asset managers analyze their holdings of fixed-income and derivative products, as well as the performance of so-called balanced funds, which invest in both bonds and equities.
Since then, the product has been adapted to handle pretty much all forms of investment that a fund manager might be interested in. And Odyssey itself is being acquired, for $81 million, by Geneva-based Temenos, a supplier of banking software.
The Odyssey product intends to provide the investment manager with a holistic way for dealing with the "circular life cycle" of funds, from looking backward at past performance, to analyzing expected results and risks of present holdings, to targeting changes in holdings, figuring out the best replacement investments to look at, analyzing risks of those changes, stress testing the changes and, then, when ready, executing the orders. Then, the fund manager can repeat the cycle as needed.
The starting point is where a fund manager currently stands. The Investment Manager product takes an upload of data on individual financial instruments as well as investment positions from a fund company's book of record.
That book of record can be in its own back office, an outsourcer such as a custodian or a fund administrator or a combination of any or all of these.
The data and positions then get "enriched" by updated pricing from Bloomberg or Barclay's Point risk management service, for instance, Dawson said. And the present values are rippled through the picture.
The updates are not constant. Odyssey has chosen to make its approach a "pull system," so that values get updated only when the fund manager asks for them. This is to prevent the values changing every second, before his or her eyes and becoming distracting. Instead, it gives snapshots that then can be acted on.
A typical tack is to use the product's Targeter function to see into the future. The application figures out what to do if, say, a given fund is invested 46.9% in corporate bonds and the manager is thinking of pushing that to 55%.
The product determines which trades to make, to change the allocation, simulates the trades and creates a line-by-line depiction of what the portfolio will look like, afterward.
At that point (and, in effect, going in, too), the manager can revise the ripple effect to see what the holdings would look like if instructed to invest certain percentages of the corporate bonds in certain sectors of the economy or to insist on certain dividend yields or other factors.
The system would also automatically enforce compliance with regulatory or company policies. This would come into play if the fund company, for instance, had a limit in place that no fund should be invested more than 2.1% in bonds issued in Dubai or 7.2% in United Kingdom gilts.
Then, the fund manager would be able to test the changed mix to see how it is likely to perform against chosen benchmarks, such as a bond index or an in-house standard. The system will also show how exposed the new set of holdings are to interest-rate changes in year one, two, three or a selected horizon. And what the impact will be on performance, if the manager expects inflation to rear its head dramatically or a repeat implosion of some or all credit markets or similar market-turning events to occur in a given time frame.
The system also can look "backward,' with a Performance & Attribution feature. This provides fund managers with a real-time view of gains or losses in a portfolio. These can be compared to a benchmark or stated in absolute terms.
Putting everything onto one screen also fulfills a general corporate expense goal: cost-efficiency, said Craig O'Neill, an Odyssey senior vice president.
By using a suite of services from one source, companies can get up and running "in a fraction of the time and a fraction of the cost," he said, instead of trying to intergrate 29 "best of breed" applications from 29 places.
But it's not necessarily a host of specialized apps that fund companies are using. "We see the spreadsheet as our largest competitor," Dawson says.