Bringing transaction processing and position keeping into the 21st Century and supporting global business operations
In changing its operations strategy, Schroders sought solutions to a number of issues that could threaten the company's ability to grow. The existing legacy portfolio accounting solution for equity and multi-asset portfolios was reaching the end of its supportable life and this was beginning to hamper the ability to support new requirements emerging from business change. Indeed, adaptability was a particularly important consideration in the Target Operating Model design since Schroders' growth plans included acquisition of other asset management companies.
SimCorp Dimension as portfolio book of records
Within their Target Operating Model, the key component is the portfolio book of records. This core function covers position-keeping and lifecycle management across all portfolio mandates and reporting structures, as well as transaction processing, investment accounting, income processing and corporate actions. Furthermore, it is the source of transactional and positional information on which all other up- and down-stream systems, such as order management and client reporting, rely. These functions had previously been supported by a 27 year old system developed in-house which was based on a hardware platform (HP3000) that was at the end of its life.
SimCorp has invested consistently in investment accounting system development.
The platform was stable and capable of extension, but the risk of failure associated with the platform were going to become exponentially greater within a few years. Schroders' search for a replacement solution identified fifteen potential suppliers, soon whittled down to a shortlist of three. After a thorough assessment process, SimCorp Dimension emerged as the clear best choice. Matthew Oakeley, Schroders' Head of Group IT explains, “SimCorp has invested consistently in investment accounting system development.”
Also contributing to the decision was SimCorp’s approach to roll-out of system enhancements. “SimCorp expects certain things from its customers in their use of the system, such as annual upgrades,” says Oakeley, “This was initially a concern, but as we evaluated SimCorp we concluded that the advantages outweighed any downside. It means that our system will be constantly kept current.”
Recognizing that the architecture contained many interdependencies, Schroders supplemented conventional late-stage testing methods by using a ‘model office‘ for three weeks. This innovative approach involved establishing a portfolio holding a small amount of Schroders' own capital and running it as live, actually trading different kinds of securities. As Oakeley puts it, this ‘smoke-tested the pipes‘, revealing some anomalies in interfaces, workflows and scheduling, which were fixed before going live. It also proved an excellent training tool.
Despite the scope of the project, the migration of portfolios to live production began exactly on schedule. The plan involved migrating portfolios in three tranches. Each tranche was migrated on a ‘balance forward‘ basis (i.e. without transaction history) so, due to reporting requirements, migrations could only occur on month ends that were not quarter ends.
It went live on time, on budget, quietly, which is what you want with a project like this - and the users are happy… We had a cracking good team: very professional and highly knowledgeable, they really brought their experience to bear.
The focus on preparation and testing paid off. Oakeley states that, “Going live was much smoother than we could have imagined, well above our expectations, so much so that we even considered bringing forward the third tranche by a month. We could have, but in the end we decided that there was no need to introduce risk into a process that was working well, so we stuck to the plan.”
The SimCorp Dimension implementation project was an undoubted success. Oakeley sums up, saying that, “It went live on time, on budget, quietly, which is what you want with a project like this - and the users are happy.” Asked what contributed to the success, Oakeley identifies the clear objectives defined by the Target Operating Model and the rigor of the testing. He also highlights SimCorp consultants on the project, “We had a cracking good team: very professional and highly knowledgeable, they really brought their experience to bear.”
Efficiency gains were enjoyed immediately, with previous workflows now unnecessary. “We used to have workarounds on top of workarounds,” says Oakeley, “now though, we’ve been able to rationalize 4,500 legacy reports down to about 250.”
The architecture of the new solution and its scalability meant that operational risk was greatly reduced. This was proven as early as October 2008, a period of extraordinary market turbulence. In such times management requires information much more frequently. Consequently 16 ‘split periods‘ (calculation cycles usually run only at month end) were run that month out of 22 business days. “This was probably the most volatile month in the history of markets,” notes Oakeley,“It exercised the system, but we coped far better from a reporting and investment accounting point-of-view because SimCorp Dimension was there.”
This was probably the most volatile month in the history of markets,” notes Oakeley: “It exercised the system, but we coped far better from a reporting and investment accounting point of view because SimCorp Dimension was there.
And what of the objective to be adaptable to changing business requirements? Oakeley states that, “We have implemented SimCorp Dimension very much in accordance with our model, so going forward we know where to implement required new functions to support business change. It avoids systems spaghetti but without insisting on a single system to do everything. With SimCorp Dimension implemented within our Target Operating Model the whole architecture works.”
The impact of the implementation of SimCorp Dimension within the Target Operating Model has been recognized outside of Schroders. The firm's use of SimCorp Dimension was cited as a contributing factor to Schroders' upgraded Asset Manager Rating by Fitch Ratings in November 2008 and the project has also garnered industry awards. “It's nice that people around the City have spotted it,“ says Oakeley, “but more importantly we believe that it indicates that we are ahead of our peers if they are only now thinking of implementing the systems we have already installed.“
Name: Schroder Investment Management
Headquarters: London, England
Industry: Asset and Wealth Management
AUM: EUR 400 billion (as at September 2015)
About SchRoder Investment Management
Schroders manages GBP294.8 billion (EUR400.0 billion/USD$446.5 billion) on behalf of institutional and retail investors, financial institutions and high net worth clients from around the world, invested in a broad range of active strategies across equities, fixed income, multi-asset, alternatives and real estate. Schroders employs over 3,700 talented people worldwide operating from 37 offices in 27 different countries across Europe, the Americas, Asia and the Middle East, close to the markets in which they invest and close to their clients. Schroders has developed under stable ownership for over 200 years and long-term thinking governs their approach to investing, building client relationships and growing their business.