WELLESLEY, Mass. - JPMorgan Funds, Envision Financial Systems and PFPC Worldwide took top honors in SourceMedia's 2005 Fund Operations Awards. Now in its third year, the awards program is sponsored by Money Management Executive, judged by a panel of leading industry consultants and presented annually at the National Investment Company Services Association (NICSA) general membership meeting. As in the past, MME honored industry leaders in three categories: Leadership, Innovation and Efficiencies/Streamlining.
LEADERSHIP
1st Place Winner
Stephen M. Wynne
President
PFPC WORLDWIDE
A 25-year veteran of PFPC, who became president of PFPC Worldwide, with oversight of $1.8 trillion in assets, just this year, Stephen M. Wynne's (see photo on page 6) client-centric focus has been on developing new technological automations and portfolio system breakthroughs. The net result is to enable portfolio managers and their back-office supporting teams to concentrate on their investment management business at hand, with minimal error.
In 2002, for example, Wynne spearheaded the creation of fully automated transaction processing and reporting software to alleviate fund managers' manual wash sales processing. An efficient solution for any type of mutual fund, this advanced capability is particularly well suited for index and other high-volume, high-turnover funds.
As Wynne himself noted, the software also offers portfolio managers the ability to decide which security lots should be sold, and at what time, to ensure tax optimization.
Wynne is also co-author of the Fundamentals of Mutual Fund Accounting textbook (Widener University Press, 2004), which has been picked up by five U.S. universities, including Philadelphia's St. Joseph's University, and two in Ireland. A Widener graduate, Wynne returned to his alma mater last year to teach a graduate course on the mutual fund industry.
As Mike Scardina, vice president and chief financial officer of Dimensional Fund Advisors, said of Wynne: "He has truly made this his life's work."
LEADERSHIP
2nd Place Winner
Jane Brennan
Divisional Vice President Process Improvement Office
BOSTON FINANCIAL DATA SERVICES
As divisional vice president in charge of the Process Improvement Office at Boston Financial Data Services, Jane Brennan is responsible for transfer agency operations units servicing Dreyfus, Phoenix Investments, New York Life Investment Management, Davis Advisors, Selected Funds and other leading clients with more than $760 billion in assets under management.
As seen through the eyes of her colleagues, Brennan is an enthusiastic, inspirational leader committed to excellence. In the past year, she has addressed the immediate challenges wrought by the trading scandal, while never losing sight of her devotion to the inventors of the future.
It was Brennan's own idea to create the Process Improvement Office, where, as she says, the goal is to "reduce cycle times by streamlining processes and reducing steps." And unlike so many others in the investment management industry, Brennan says she also embraces the details of "hands-off, non-value-added activities, while improving quality and reducing rework.'"
At this office, where BFDS partner teams are also brought in to present their strategies, Brennan leads her team to focus on continuous improvement through what she calls "Lean Thinking" and Six Sigma. She also recognizes her team's excellence with five-star ratings, as developed by the National Quality Review, and the firm's own "Black Belt" certificates.
The net result is impressive, a mere three defects for every million transactions, and in the case of a simple change for one client, annual savings of $400,000.
LEADERSHIP
3rd Place Winner
Chuck Booth
Senior Vice
President & Compliance Officer
BISYS FUND SERVICES
MME's panel of judges this year honors Chuck Booth, BISYS Fund Services senior vice president and compliance officer, for his integral role in developing the BISYS ComplianceEdge program.
Launched only a year ago as a flexible chief compliance officer outsourcing support system to help investment advisors meet the Oct. 5, 2004 CCO deadline, nearly 40% of BISYS clients now make some use of the program's independent services. Another 70% of BISYS' full-service clients make use of the program's core functions.
ComplianceEdge can trace, test and report on 600 identified and monitored compliance procedures across transfer agency, administration, fund accounting and distribution activities - using up to 30 different tests for each procedure each year, with reports delivered to CCOs on a monthly basis, including aggregated statistics.
In explaining the intended breadth and reliability of the program, Frederick Schmidt, CCO for several BISYS full-service clients, commented: "Greater accountability is a cornerstone of the compliance rule. The transparency and testing BISYS' state-of-the-art program provides keeps me and the boards of directors fully informed."
INNOVATION - TIE
1st Place Winner
Envision Financial Systems
POWERFOLIO
For the second year in a row, Envision Financial Systems received first place for innovation, this year for the PowerFolio component of the PowerAgent transfer agency system. While the Fund Operations Awards judging panel selected PowerAgent in 2004 as first-place innovation winner for its scalability functions, it is similar, but more specific, aspects of PowerFolio that earned it the same high honors for 2005.
The folio's real-time cash feature permits portfolio managers to keep as accurate a projection as possible of cash flows in index stocks and derivatives, by tracking purchase, redemption and exchange patterns through all of the means of communication available today to retail investors and sales agents, including file transmissions from NSCC's Fund/SERV system. Further, the system can detect and eliminate the many double entries possible from such a complex order maze.
As Envision succinctly puts it, this is "real-time synchronization."
The second key component of PowerFolio is its group trading, which allows an adviser or broker to organize accounts into groups based on their risk preferences or chosen asset-allocation models, with the goal of aggregating orders, holdings and performance.
"For example, a financial adviser can come in at 3:55 p.m. and put in an end-result trade, designating holding percentages in each fund on trade execution," according to Envision. "The system then, in real time, analyzes all accounts in the group and generates the required trades to bring the holdings in all funds, in each account, to the desired percentages."
Given the continued heightened scrutiny over late trades, the system makes it easy for brokers, financial advisers and mutual fund companies just hitting the 4 p.m. market close, to accept trades right up until the deadline. And for portfolio managers, the parallel real-time cash module instantaneously rebalances the resulting changes in cash flows.
INNOVATION - TIE
1st Place Winner
PFPC
HEALTH SAVINGS ACCOUNT
Tied for first place, Innovation, once again, was PFPC, for the ease of its Health Savings Account (HSA) enrollment kit.
A new breed of investment accounts that could potentially eclipse 529 college-savings plans, as the population of the United States continues to skew toward Baby Boomers and senior citizens, HSAs are not yet well understood either by investment managers or retail investors. Inherent limitations in the nation's healthcare and insurance systems, however, could encourage workers to begin saving additional money for out-of-pocket expenses, and tax-exempt HSA contributions allow them to do that easily, while helping employers keep growing healthcare and other overhead costs down.
PFPC's enrollment kit tells people at the outset, "Welcome! This package of materials is designed to help you enroll in a new program that offers you and your family more flexibility in handling your medical expenses." The literature also informs investors that HSA earnings, if any, accumulate tax-free from year to year, and are portable from employer to employer.
"A special feature of our HSA program," the enrollment kit adds, is that "once the required minimum account balance is met, you can direct your HSA dollars into multiple mutual fund investment options."
The brochure also answers thorny questions, such as, what happens if an HSA is used for non-qualified expenses; what a qualified high-deductible health plan is; what other types of health plans can be used in conjunction with a HDHP, such as auto insurance; and whether a person can handle healthcare costs out-of-pocket without disrupting their HSA.
INNOVATION
2nd Place Winner
SEI Investments
KNOWLEDGE PARTNERSHIPS
Facing the solemn fact that it is no longer business as usual in the mutual fund industry, SEI Investments launched the SEI Knowledge Partnership in June 2004, an educational and communications outreach program designed for clients.
Under the direction of SEI Managing Director of Strategy & Innovation Paul Schaeffer, the partnership prioritizes key issues facing the upper management of investment advisors, and addresses those concerns interactively through a Web site, Webinars, in-person conferences, white papers, audio and visual presentation recaps, and, last but not least, action steps tailored for each client. In its first 10 months, for example, the partnership published the "Top 7 Compliance Issues for 2005," how to handle the SEC's new attention to e-mail retention, what fund boards should focus on in their annual evaluations, the "culture of compliance" and how to prepare for the new generation of SEC exams.
Outside guest speakers have included many of the experts MME editors frequently interview, as well as a number of new names, including David Titsworth, executive director of the Investment Counsel Association of America; John Casey, chairman, Casey Quirk & Assoc.; and a number of leading attorneys from Morgan, Lewis, Bockius.
"These are times of unprecedented change and upheaval for the investment management industry, and for mutual fund organizations in particular," according to the SEI Knowledge Partnership team. "A flood tide of new regulation, shifting investor demand, changing business economics is combining to reshape the industry's competitive landscape."
Currently, the top-line goals SEI and its client partners have enumerated are: 1) legal and regulatory change, 2) distribution, sales and marketing, 3) client service, 4) business operations and outsourcing and 5) business strategy.
For 2006, SEI will continue to focus on compliance issues.
INNOVATION
3rd Place Winner
State Street Corp.
COLLATERAL MANAGEMENT SERVICES
For institutional investors, handling collateralized transactions can be complex, costly and risky, to say the least. State Street Corp. has developed a customizable collateral system that is global, scalable, ISO-certified and Web-enabled to deliver "a vast array of electronic reporting options in a secure environment."
Some of the more complex types of collateralized transactions the system can handle to support bonds (supranational, government, corporate), convertible bonds, floating-rate notes, commercial paper, asset-backed securities and equities include: repurchase agreements, securities lending, pledge agreements, secured loans, SWAP transactions and OTC derivates contracts.
As State Street explains, "With our service, asset managers can categorize and value collateral types at any level from country and instrument type, to individual security issues, by nominal values or percentage and concentration limits, and, most recently, liquidity and volatility selections - making it easy to create custom reports. The application of rules-based criteria is automated, ensuring fast execution of all transactions."
EFFICIENCIES / STREAMLINING
1st Place Winner
JPMorgan Funds
JPMORGAN/BANK ONE MERGER
With an executive team including JPMorgan Funds Chief Operating Officer Bob Young and the chiefs of fund administration and control distribution, fund accounting and financial reporting and transfer agency oversight and client servicing, the merger of the investment advisory capabilities of JPMorgan Chase & Co. and Bank One Corp, creating the fifth-largest fund family in the U.S., was no easy task. It was completed just 397 days after its conception in February 2004 through, no less than two million proxies and 4,562,700 pages of registration statements with the SEC.
During this time frame, call center representatives handled a 19% increase in call volume and bank executives put in more than 300,000 hours to handle the merger.
This incredible workload is totally understandable, given that JPMorgan and Bank One merged or altered a total of more than $100 billion in assets, via 67 share classes in 40 funds. In the process, the banks changed 201 class-level names and 287 CUSIPs.
The projected net result of this massive undertaking will be a savings of $17 million a year.
In accepting the award, Young acknowledged "the enormous effort and contributions" of his management team in "executing one of the most complex projects ever undertaken in the U.S. mutual fund industry. No other asset management firm has completed a merger of this scope in such a short time frame."
EFFICIENCIES / STREAMLINING
2nd Place Winner
Boston Financial Data Services
PROCESS IMPROVEMENT OFFICE
In conjunction with second-place trophies going to Jane Brennan, a divisional vice president with Boston Financial Data Services, the judging panel rated the efforts of Brennan's team second place, Efficiencies/Streamlining.
As mentioned, under Leadership, Brennan and the BFDS team supporting the firm's Process Improvement Office, does an outstanding job of reducing clients' expenses, while at the same time, encouraging what she calls the "inventors of the future."
BFDS is transfer agent to 145 fund companies representing more than 5,500 funds, 21.5 million investors and $760 billion in assets.
EFFICIENCIES / STREAMLINING
3rd Place Winner
Curian Capital
Custom Style Portfolios'
SINGLE SOLUTION
An undisputed leader of the pack trying to bring separately managed accounts to the masses, with a minimum account of as little as $25,000, Curian Capital, a division of Jackson National Life Insurance, has developed a Web-based, paperless platform meant to "unlock the power of managed accounts for financial professionals," in some cases permitting them to open an SMA on the same day.
In 2004, Curian's Custom Style Portfolios managed accounts grew 297%, to 9,400 accounts with more than $1 billion in assets under management. Last year alone, Curian took in $776 million, and to date, Curian has secured more than 215 selling agreements with independent broker/dealers representing 16,000 financial professionals.
In its entry form, Curian noted that the benefits of its custom style portfolios are: risk management, customization and transparency.
Judges
SourceMedia's 2005 Fund Operations Awards
As Presented by Money Management Executive
Ian Frost,Vice President & Director,
The Boston Consulting Group, Inc.
Robert Goldberg, President Emeritus,
National Investment Company Service Association
Steven Miyao, President, kasina.com
Charles O'Neil, Principal, DMR Financial
Vincent Walsh, Managing Director, KPMG
(c) 2005 Money Management Executive and SourceMedia, Inc. All Rights Reserved.
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