Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Australian Ethical plugs into Charles River
Australian Ethical will use the Charles River Investment Management Solution (IMS) to automate front and middle office processes for its entire investment portfolio across risk management, trading, compliance, performance measurement and attribution, IBOR and transaction management.
Owned by State Street, Charles River and its IMS are used by 325 clients globally, managing more than US$59 trillion in assets. As part of the deal, Australian Ethical will also become the latest of State Street’s clients in the region to deploy Alpha, its front-to-back asset servicing platform, to manage its investment data.
“We are pleased to be implementing Charles River in our front and middle office which will complement our move to State Street back office investment administration,” said Australian Ethical CFO Mark Simons.
“We see Charles River and State Street Alpha as a critical step in maturing our investment management platform end-to-end. Having seamless data management and connectivity across our portfolios will provide significant operational efficiencies and reduce risk as we continue to grow.”
The mandate follows Australian Ethical’s appointment of State Street as its custodian in a move it hopes will “deliver future cost savings and enhancements to our super and investment platforms”. Australian Ethical also recently consolidated its administration services from Mercer and Link to upstart provider Grow Inc.
“The mandate further demonstrates that State Street Alpha provides value to asset managers and owners of varying complexity and scale, who are looking to streamline their investment process to deliver efficiencies and insights across their investment operations, from portfolio construction to custody,” said State Street country head Tim Helyar.
It’s a nice win for State Street that comes hot on the heels of its appointment as custodian and administrator for the $127 billion Challenger, from which it also expects to take on 100 employees from Artega – a cloud-based front-to-back investment operations platform Challenger majority owns – in an influx of expertise that will boost State Street’s Alpha-focused business strategy in Australia.
“It complements our strategy,” Helyar told ISN in September. “We get to move the business on to our Alpha platform and we get access to a hundred people that enable the execution. We can take carriage of that business and hit the ground running. Our number one priority is to make sure that we continue to service our existing clients in a seamless fashion, but at the same time, if we’ve got an opportunity to grow in an inorganic way – there’s not too many opportunities like that out there in the market.”
