Family Office
IXIS drops CheckFree for Vestmark

Manager says upstart vendor’s tech supports growth in new
channels. IXIS Asset Management Advisors has chosen enterprise
software maker Vestmark to provide support technology for its
separately managed account (SMA) program. In making that move,
IXIS says it’s dumping CheckFree Investment Services’ APL, the
leading portfolio-management technology provider to SMA sponsors
and managers.
“Vestmark is replacing CheckFree APL,” says Curt Overway,
president of Oakland, Calif-based Managed Portfolio Advisors,
IXIS’ overlay management division. Overlay management is the
process of reconciling aligning trading activity, managing cash
flow and enhancing the overall tax efficiency of
multiple-discipline accounts (MDAs) and unified managed accounts
(UMAs).
Up and running
“[CheckFree] has been very supportive of us through a tremendous
amount of growth,” Overway says. But as IXIS wanted robust
monitoring for its overlay management and multi-currency
capabilities to help it win institutional and high-worth clients
– functionalities Overway says APL doesn’t have – in addition to
portfolio accounting and trade-order management, it decided to go
with Vestmark.
And though CheckFree is developing more advanced
portfolio-management capabilities for EPL, a successor platform
to APL, Overway says that EPL “has no definite timeframe” for
release whereas “Vestmark has capabilities that have been
available and operating for a couple of years now.” As it is, he
figures it will take the better part of a year to make the
move to an all-Vestmark platform.
CheckFree, meanwhile, says that EPL, now in the beta-testing
phase with SMA managers and sponsors, will be ready for roll out
later this year.
Much of the growth of IXIS’ SMA assets – up about 90% to $11
billion in the 15 months through 31 December 2005 – has come on
the back of MDA mandates from brokerages such as Merrill Lynch,
UBS, Linsco Private Ledger (LPL), Amerprise and DB Alex.
Brown.
On a roll
MDAs – which account for $8.3 billion of IXIS’ SMA assets –
combine complementary asset styles in a single account. UMAs
combine asset styles and asset classes in a single account.
IXIS’ success as an MDA manager supports the view that
multi-discipline accounts are on a sharp growth trajectory.
Speaking at a Money Management Institute conference in January
last year, Financial Research Corporation (FRC) president Neil
Bathon said that multi-discipline accounts accounted for about
$80 billion in assets at the end of 2004. And by 2011, he said,
they’ll have increased tenfold. Given the FRC’s prediction that
total SMA assets – now approaching $700 billion – will come to
about $1.2 trillion by the end of the decade, it would seem that
MDAs are on their way to commanding the lion’s share of SMA
assets.
Although other observers don’t see MDAs growing quite that fast,
most agree that they’re proving popular, especially with
mass-affluent investors eager to achieve broader allocations at
generally lower overall investment minimums than traditional SMAs
can afford them. Others add that multi-discipline accounts are
easy for advisors to explain to clients and comparatively easy
for advisors to administer.
Asset managers aren’t universally keen on MDAs, however.
Participation in multi-discipline accounts calls for managers to
license their models to a third-party; either the overlay manager
or the sponsor, depending on how the deal is structured. That’s
anathema to managers who prefer to keep secret the nitty-gritty
of their management styles. It also raises questions of who
actually “owns” the performance of licensed models.
New channels
Part of IXIS’ edge in the MDA game comes down to its ability to
combine styles and investment vehicles from a fat roster of
affiliated managers. Those are Active Investment Advisors, AEW
Capital Management, Capital Growth Management, Caspian Capital
Management, Delafield Asset Management, Hansberger Global
Investors, Harris Alternatives, Harris Associates, Loomis Sayles,
Reich & Tang, Snyder Capital Management, Vaughan Nelson and
Westpeak Global Advisors.
But IXIS isn’t wholly dependent on its affiliates to make headway
with MDAs. Late last spring it carved out a new unit – Overway’s
Managed Portfolio Advisors – to parlay its experience managing
MDAs into a distinct, product-neutral offering to SMA sponsors in
competition with established players like Placemark Investments
and Parametric Portfolio Associates.
In addition to supporting its growth in existing channels,
Overway says the transition to Vestmark’s SMA platform will help
IXIS meet “demand for our capabilities coming from outside the
typical SMA space.” Specifically, French-owned IXIS wants to
provide overlay management to institutional, high-worth and –
“because we’re a global company” – international clients.
In the high-worth realm, IXIS plans to target families offices
and investment-counsel boutiques as well as accountants and
attorneys with high-worth clientele. “We’re seeing some pretty
significant opportunities there,” says Overway.
In assessing Vestmark, IXIS talked at length with several of its
existing clients. “They had great things to say,” says Overway.
“Not only about [Vestmark’s] technology and capabilities, but
also about the quality of their team and their
responsiveness.”
Turning heads
Jamie Punishill, a Cambridge, Mass.-based analyst with Capgemini,
a consultancy, agrees that Vestmark is turning heads. “It’s hard
to assess precisely,” he says. “But the name comes up a lot and
they seem to be doing well.”
Jeff Strange, an analyst with Cerulli Associates, a Boston-based
research firm, sees Vestmark and other tech vendors such as
Smartleaf and Upstream positioning themselves to take advantage
of CheckFree’s transition from its “old guard” APL platform to
its new EPL offering – a move that calls for CheckFree to take
out each APL installation and replace it with the new platform.
“EPL is absolutely a part of this,” he says.
IXIS is Wakefield, Mass-based Vestmark’s eighth client, and its
biggest to date. In addition to supporting SMA sponsors such as
LPL, Overture Financial Services and RW Baird– another brand-new
win – Vestmark president Rob Klapprodt says it also provides
technology to several managers that, like IXIS, prefer to keep
most of their SMA operations in house.
For managers that want to outsource the bulk of their SMA
operations, Vestmark works with business-service providers BISYS,
Citigroup and JPMorgan Chase, all of which have had fairly recent
wins. In fact, six of the last 11 all-ops outsourcing deals – and
the last four in a row – have gone to vendors whose platforms
feature Vestmark as their default portfolio-management
provider.
Boston-based IXIS Asset Management Advisors is the U.S.
distribution arm of IXIS Asset Management Group, a unit of
Paris-based Groupe Caisse D’Epargne. –FWR
.