Vestmark Offers Models for Unified Managed Accounts
December 12, 2011
Vestmark has become the second firm to announce that it has sent the Money Management Institute (MMI) proposed message formats for how asset managers should communicate information on investment models to overlay managers in the unified managed accounts industry.
The message formats represent instructions -- and any changes --on how the overlay managers should invest assets in model-based UMA programs. In October, Depository Trust & Clearing Corp. said it would do so for the Washington, D.C.- based trade group representing the managed accounts industry.
An investment model typically consists of a list of securities with relative weightings in a representative portfolio. Investment managers are responsible for coming up with models which are implemented by so-called overlay managers who often serve as the sponsor – or distributor of the unified accounts.
Vestmark already offers a communications platform for asset managers and overlay managers to communicate with each other while DTCC is in the process of developing a model management exchange. Neither Vestmark nor DTCC would comment on the differences between their schemas although Vestmark says that they likely reside in the data elements of the messages rather than the workflow between the asset managers and overlay managers.
Both firms claim to have industry support on their side. "Our schemas are already in use across our customer base and we have leveraged that experience and visibility in creating our message schemas," says Heeren Pathak, chief technology officer at Wakefield, Ma-headquartered Vestmark, which offers workflow software for asset managers and overlay managers. Pathak also co-chairs the MMI's model subcommittee responsible for coming up with final industry standards.
Overlay managers using Vestmark’s platform to accept investment models include LPL Financial, Natixis Managed Portfolio Advisors, Adhesion, Freestone and UBS Global Asset Management. Edward Jones has also launched a unified managed account program and outsourced overlay management to Natixis Managed Portfolio Advisors.
In a statement issued to Securities Technology Monitor responding to Vestmark's news, a spokesman for DTCC says that the market-owned utility will continue to work closely with its senior advisory user group comprising model sponsors and managers as well as the MMI model subcommittee to offer "this much needed solution." The spokesman calls DTCC's Model "Management eXchange "the only industry-offered centralized platform for model management communications."
Although Vestmark may be first to market, DTCC is betting heavily that its clout as the umbrella organization for the U.S. securities industry's central clearinghouse and depository will give it an advantage with the MMI subcommittee. "The company released its model message schemas in October to help move the industry toward a single platform that centralizes and streamlines communication among investment managers, overlay portfolio managers and program sponsors, reducing risk and strengthening overall efficiency in this rapidly growing market segment," says DTCC's spokesman in the statement.
Pathak says that the MMI subcommittee will evaluate all of the schema submissions and select the best elements of each in coming up with the technical standards for the UMA market. "Investment managers and overlay managers would benefit from standard message formats and overlay managers could even work with more asset managers," he says, adding that his firm would absorb the additional work and costs of adapting the new standards.
