Labelling it ‘State Street Alpha’, the big asset servicing and fund management firm, which purchased the global financial software company Charles River Development in 2018, has embarked on a journey to be the leading provider of asset intelligence to the owners and managers of the world’s capital.
According to Sinclair Scholfield, State Street’s Sydney-based head of platform solutions, Asia Pacific, the initiative is helping clients drive operational transformation through improved agility, data accuracy, asset intelligence and decreased costs. “We are looking at market segments and ensuring that we understand the capability requirements that will help deliver growth. Traditionally, this has been between asset owners, asset managers, insurers, official institutions and the alternatives sector… and through Charles River’s client base, we are now more prevalent in the wealth management [wholesale] space”.
This issue, of mass customisation, has challenged asset servicing firms for years. Asset Managers are demanding lower costs as well as increased administration performance and better information. The big custodian banks, like State Street, can deliver on the extra information and lower base costs, as they have done, but when it comes to providing a customised bespoke service, that costs money.
Lou Maiuri, State Street’s Global COO, has the overarching responsibility for this service. Maiuri’s pedigree is one of entrepreneur, having led the start-up technology company Eagle PACE to great success. Coupled with this experience is his senior position within State Street, reporting directly to Ron O’Hanley, the president and chief executive. Maiuri is also passionate about driving the connectivity for clients, in effect lowering their overall costs whilst increasing functionality and efficiency.
With technological advances and its new range of capabilities, State Street thinks it can satisfy the information and investment servicing needs for its clients from the front through to the back office. This is underpinned by an interoperable platform based on comprehensive and well governed data management. A differentiator from other big competitors is that State Street’s ‘front-to-back’ service is all proprietary. The firm controls every aspect of the value-add process (it outsources domestic or sub-custody in some countries – in Australia and New Zealand that’s to HSBC).
‘DataGX’, which was established in late 2013 as a new research and data pillar of State Street was initially led by Jeff Conway, an American who ran the Australian asset servicing business for some years. This has evolved and is now known as ‘State Street Alpha Data Service’. You can get the inference. It’s that operational efficiencies and value-added information through such services can add alpha to fund manager and pension fund investment returns.
“Since our acquisition of Charles River, we have continued to enhance our data service through expansion of its applicability into the front office, as well as partnering with Microsoft Azure to enable State Street Alpha cloud solutions. We are focused on a single source of truth which is fundamental to the entire investment workflow including securities master, corporate actions, benchmark, securities pricing amongst others, which gets stored once and is then in sync and replicated in close to real time,” Scholfield says. “Our operational governance structure has become front and centre of every conversation we are having with our clients. This is a core feature that enables our integrated workflow to remove the need for reconciliations and the risk of failures associated with out of synch data and batch data deliveries to systems throughout the workflow”
He says the platform has been designed to be “fully interoperable, fully integrated”. State Street is building an ecosystem of partnerships with vendors around the world that enhances the efficiency of information processing for its clients. Examples include full integration into the Charles River Manager Workbench and factor-based modelling and analysis tools from MCSI, Axioma and Northfield. The data from State Street workflows is all integrated and available in real time to those tools, he says. “Some clients need outsourced trading, cash management and other integrated data. Integration from the back to the front office is enabling greater efficiencies. Cash is a great example where applications and redemptions within the transfer agency (TA) system will move from the back office to the front office in near real time. Combining this information with intra-day trade and corporate actions gives a manager a picture of their cash balance in near real time”
State Street has dealt with earlier criticism, which was that the client had to be very big to take advantage of the service. “State Street Alpha is not only for the very large institutional investors in the market. We can also service smaller clients with all the same functionality,” Scholfield says.
“We deploy a very efficient middle-office function, for clients that range in size and scale from domestic or regional asset managers and asset owners, to a client who can have anything up to $1 trillion or more under management… We are helping our clients transform their operating models from a fixed cost to a variable-cost basis and that is paying dividends for them… The scale of State Street and our capital and technology investment further supports their growth objectives. We invested US$100 million into Charles River Development in R&D for 2019, doubling the previous rate of investment and have continued this level of investment in 2020.”