Manager says upstart vendor’s tech supports growth in new channels. IXIS Asset Management Advisors has chosen enterprise software maker Vestmark to provide support technology for its separately managed account (SMA) program. In making that move, IXIS says it’s dumping CheckFree Investment Services’ APL, the leading portfolio-management technology provider to SMA sponsors and managers.

“Vestmark is replacing CheckFree APL,” says Curt Overway, president of Oakland, Calif-based Managed Portfolio Advisors, IXIS’ overlay management division. Overlay management is the process of reconciling aligning trading activity, managing cash flow and enhancing the overall tax efficiency of multiple-discipline accounts (MDAs) and unified managed accounts (UMAs).

Up and running

“[CheckFree] has been very supportive of us through a tremendous amount of growth,” Overway says. But as IXIS wanted robust monitoring for its overlay management and multi-currency capabilities to help it win institutional and high-worth clients – functionalities Overway says APL doesn’t have – in addition to portfolio accounting and trade-order management, it decided to go with Vestmark.

And though CheckFree is developing more advanced portfolio-management capabilities for EPL, a successor platform to APL, Overway says that EPL “has no definite timeframe” for release whereas “Vestmark has capabilities that have been available and operating for a couple of years now.” As it is, he figures it will take the better part of a year to make the move to an all-Vestmark platform.

CheckFree, meanwhile, says that EPL, now in the beta-testing phase with SMA managers and sponsors, will be ready for roll out later this year.

Much of the growth of IXIS’ SMA assets – up about 90% to $11 billion in the 15 months through 31 December 2005 – has come on the back of MDA mandates from brokerages such as Merrill Lynch, UBS, Linsco Private Ledger (LPL), Amerprise and DB Alex. Brown.

On a roll

MDAs – which account for $8.3 billion of IXIS’ SMA assets – combine complementary asset styles in a single account. UMAs combine asset styles and asset classes in a single account.

IXIS’ success as an MDA manager supports the view that multi-discipline accounts are on a sharp growth trajectory. Speaking at a Money Management Institute conference in January last year, Financial Research Corporation (FRC) president Neil Bathon said that multi-discipline accounts accounted for about $80 billion in assets at the end of 2004. And by 2011, he said, they’ll have increased tenfold. Given the FRC’s prediction that total SMA assets – now approaching $700 billion – will come to about $1.2 trillion by the end of the decade, it would seem that MDAs are on their way to commanding the lion’s share of SMA assets.

Although other observers don’t see MDAs growing quite that fast, most agree that they’re proving popular, especially with mass-affluent investors eager to achieve broader allocations at generally lower overall investment minimums than traditional SMAs can afford them. Others add that multi-discipline accounts are easy for advisors to explain to clients and comparatively easy for advisors to administer.

Asset managers aren’t universally keen on MDAs, however. Participation in multi-discipline accounts calls for managers to license their models to a third-party; either the overlay manager or the sponsor, depending on how the deal is structured. That’s anathema to managers who prefer to keep secret the nitty-gritty of their management styles. It also raises questions of who actually “owns” the performance of licensed models.

New channels

Part of IXIS’ edge in the MDA game comes down to its ability to combine styles and investment vehicles from a fat roster of affiliated managers. Those are Active Investment Advisors, AEW Capital Management, Capital Growth Management, Caspian Capital Management, Delafield Asset Management, Hansberger Global Investors, Harris Alternatives, Harris Associates, Loomis Sayles, Reich & Tang, Snyder Capital Management, Vaughan Nelson and Westpeak Global Advisors. 

But IXIS isn’t wholly dependent on its affiliates to make headway with MDAs. Late last spring it carved out a new unit – Overway’s Managed Portfolio Advisors – to parlay its experience managing MDAs into a distinct, product-neutral offering to SMA sponsors in competition with established players like Placemark Investments and Parametric Portfolio Associates.

In addition to supporting its growth in existing channels, Overway says the transition to Vestmark’s SMA platform will help IXIS meet “demand for our capabilities coming from outside the typical SMA space.” Specifically, French-owned IXIS wants to provide overlay management to institutional, high-worth and – “because we’re a global company” – international clients.

In the high-worth realm, IXIS plans to target families offices and investment-counsel boutiques as well as accountants and attorneys with high-worth clientele. “We’re seeing some pretty significant opportunities there,” says Overway.

In assessing Vestmark, IXIS talked at length with several of its existing clients. “They had great things to say,” says Overway. “Not only about [Vestmark’s] technology and capabilities, but also about the quality of their team and their responsiveness.”

Turning heads

Jamie Punishill, a Cambridge, Mass.-based analyst with Capgemini, a consultancy, agrees that Vestmark is turning heads. “It’s hard to assess precisely,” he says. “But the name comes up a lot and they seem to be doing well.”

Jeff Strange, an analyst with Cerulli Associates, a Boston-based research firm, sees Vestmark and other tech vendors such as Smartleaf and Upstream positioning themselves to take advantage of CheckFree’s transition from its “old guard” APL platform to its new EPL offering – a move that calls for CheckFree to take out each APL installation and replace it with the new platform. “EPL is absolutely a part of this,” he says.

IXIS is Wakefield, Mass-based Vestmark’s eighth client, and its biggest to date. In addition to supporting SMA sponsors such as LPL, Overture Financial Services and RW Baird– another brand-new win – Vestmark president Rob Klapprodt says it also provides technology to several managers that, like IXIS, prefer to keep most of their SMA operations in house.

For managers that want to outsource the bulk of their SMA operations, Vestmark works with business-service providers BISYS, Citigroup and JPMorgan Chase, all of which have had fairly recent wins. In fact, six of the last 11 all-ops outsourcing deals – and the last four in a row – have gone to vendors whose platforms feature Vestmark as their default portfolio-management provider.

Boston-based IXIS Asset Management Advisors is the U.S. distribution arm of IXIS Asset Management Group, a unit of Paris-based Groupe Caisse D’Epargne. –FWR

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