May 13, 2020

Overview

This state-owned corporation manages over USD 50 billion in assets of a state fund and other funds designated by law. Since its establishment in 1980, the company has evolved its investment strategy from a singular focus on fixed income securities to managing a diverse portfolio of investments, which has brought an added duty of managing investment risk.

The client implemented systems and technology as necessary, resulting in many separate applications supporting the investments and business processes. As a result, integration was not optimal and required constant monitoring and reconciliation between systems.

Going forward, the client recognized the need for a thorough analysis of its investment management needs across the enterprise to identify of areas for improvement, better align the systems used within the various investment and accounting groups and provide a technological and operational infrastructure that allows staff to efficiently access and analyze data across all current and future portfolios.

Our client further required specific guidance on initiatives to develop internal capabilities for managing a portion of its equity portfolio. The client has historically had equity portfolios managed by external managers, while a portion of its fixed income portfolio was managed in-house.

Cutter Solution

Cutter took the following three-step approach:

  • Began with a discovery and current state assessment, evaluating current systems, processes, and workflows and identifying inefficiencies, pain points, and risks across portfolio management (across all asset classes), investment operations, portfolio accounting, performance and attribution, compliance, risk management, and data management.
  • Designed a target operating model that included assessments of alternate models ─ bundled solution, best-of-breed solution, and incremental improvements.
  • Provided more detailed options for internal management of the equity portfolio, including a short-term solution that would enable our client to start trading in the short run, while transitioning to a long-term strategic architecture.

For each target model, Cutter elaborated on vendor/system solution options, with a consensus-based recommendation on the preferred option.

Lastly, we provided an implementation roadmap that identified activities, resourcing levels, and time frames required to reach pragmatic targets and grouped tasks into logical projects and appropriate sequencing based on business priorities and the resourcing required to execute on the plan.

Cutter enhanced its findings with valuable insight from its Research and Benchmarking groups, who publish numerous research studies and related product and risk assessments on vendor solutions.

In a short time and with a limited budget, we achieved the following for the client:

  • A clear, independent evaluation of current systems and processes.
  • A target environment that enhances flexibility, agility, efficiency, and oversight, consistent with the client’s guiding principles.
  • Valuable insight into the vendor landscape on investment solutions, both in public asset classes (public equity, fixed income, etc.) and alternative investments (real estate, private equity, etc.).
  • Trusted information on how peer firms were using investment solutions (“buy versus build versus outsource”), external manager oversight, organization models, and staffing levels.
  • An implementation roadmap that enabled the firm to start managing a portion of its equities internally, while moving toward a robust long-term solution architecture.