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.
Milestone builds for growth in North America
(Pictured: Robert Caporale)
Milestone Group is expanding its North American presence and has hired an experienced securities services executive, Robert Caporale, from JP Morgan to head up the operation, based in Boston.
Caporale has spent the past 12 years at JP Morgan in strategy business and sales roles, most recently as head of sales for the Americas. Prior to that he held senior positions at IBM, Deutsche Bank and Fiserv.
Geoff Hodge, the group chief executive who has spent a lot of time in the US, said last week that he expected, in time, that North America would make up more than half of global revenue or 70-80 per cent of the northern hemisphere share. The northern hemisphere has already overtaken the Australian region in revenue contribution but the Sydney headquarters remains head office and the group’s hub for research and technology.
Milestone put its first representative into North America in 2010 and has developed new relationships with Citi, JP Morgan and State Street for the region. It has been concentrating on its Fund Oversight product which is based on its well-known pControl system
“pControl is like an iPad and Fund Oversight is like one of our apps,” Hodge, who has a background as an economist rather than technologist, says. The product is used by both asset owners and managers to help them manage their outsource relationships.
Fund Oversight was largely developed as a response to regulators in most countries, including Australia, looking more closely at the chain of responsibility in outsource relationships following the global financial crisis. “They say you can outsource the functions but you can’t outsource responsibility,” Hodge says. The product double-checks unit prices from service providers as one of its functions.
Milestone has about 34 staff in London and now 18 in Boston. “We’re putting management into those offices to develop substantial domestic businesses in each region, not just sales offices,” he said.
While admitting that Milestone was “a bit light” in Asia ex-Australia, he said Phil Cook who runs the small Hong Kong office was recently given a mandate for Fund Oversight in the region. The pensions industry was not as yet as well suited to Milestone’s products suite in Asia as elsewhere, because of the dominance of fund managers and with a large number of small markets.
