Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Despite authorities taking their foot off the environmental, social and governance pedal and recent volatility in equities and bonds, the benefits of Artificial Intelligence and improved investor transparency are just beginning.
State Street challenges BlackRock’s Aladdin
State Street and its recently acquired systems and data subsidiary, Charles River Development, have entered into a co-operative arrangement with the risk management specialist and research firm Axioma, whereby the three will integrate their analytics, allowing them, collectively, to cover most or all front, middle and backoffice tasks.
The deal is seen, potentially at least, to challenge the dominance of BlackRock, according to ‘Institutional Investor’ magazine last week. The publication said: “It’s the latest effort to build what State Street and Charles River have branded as the industry’s ‘first-ever global, front-to-back, client servicing platform from a single provider’. The joining of the two firms in October was viewed by industry observers as an attempt to compete with BlackRock’s widely used Aladdin platform, which has been one of Charles River’s biggest rivals.”
The partnership will integrate Axioma’s risk and portfolio analytics into the Charles River ‘investment management solution’, a front-and-middle-office platform. As a result, Charles River clients will benefit from access to Axioma’s full suite of factor models and portfolio optimisation capabilities directly within the Charles River IMS, State Street said in a published statement last week.
For Australian investors, the deal will enable firms to identify, measure and reduce risk in a single ‘solution’, with compliance rules and optimisation coupled with portfolio management, risk and attribution capabilities as well as Axioma’s factor models.
Charles River struggled to gain traction in a business sense in Australia prior to its purchase by State Street, for US$2.6 billion in July last year. Its services were seen as too expensive for the local market and its marketing was not especially energetic. The Melbourne office, while looking to cater to the biggest potential market in the region – Australasia – was seen as subservient to Hong Kong and Singapore.
John Plansky, the Charles River chief executive, said last week: “When State Street acquired Charles River in October 2018, the intent was to develop the industry’s first-ever front-to-back investment management and servicing platform that could support the deep enterprise data aggregation and management, analytics and compliance needs of our clients.
“Today, our partnership with Axioma serves as a testament to the depth and scalability of State Street’s front-to-back platform offering. Our global clients will be able to seamlessly integrate and leverage their portfolio management and risk analytics needs all from a single, interoperable solution.”
Sebastian Ceria, chief executive of Axioma, said: “With margins shrinking and competition increasing for investment managers, the quest for competitive advantage has never been more acute.”
Axioma produces an array of research – mostly for free – blogs and webinars about risks in investment management. It is an expert in its analysis of factor investing. See: https://www.axioma.com/insights/research/
– G.B.
