For asset managers, corporate actions are part of the package when it comes to investing in equities. But the sheer number that need to be processed can also slow a company down if the process isn’t streamlined. PGGM shares their story on how they went from an almost 100% manual process, to straight through processing (STP) rates that most firms would be proud of.
A SimCorp client since 2006, PGGM made 2016 the year to implement the Corporate Actions Manager, a relatively new module helping to automate the process of dealing with corporate actions – both simple and complex.
The project was led by Rene Kuil in the front office and Jeroen Blom in the back office. Here, they share their thoughts on how the project went, what they set out to achieve, and what benefits they have since experienced to their daily work in terms of dealing with corporate actions. Rene is a Senior Portfolio Manager, while Jeroen is a Senior Employee focusing on liquid assets, such as bonds and equities.
Rene Kuil, Senior Portfolio Manager, PGGM
Jeroen Blom, Senior Employee, PGGM
A very manual process
Previously, PGGM relied on a very manual, protracted, and slow system to execute their corporate action requirements. It involved web portals, loading of portfolio’s, print screen views put into emails, double checking data on custodian websites or a Bloomberg terminal, updating of Excel spreadsheets with this information, more emails, etc. All in all, an extremely cumbersome and inefficient process for both their front and back offices.
For the simpler corporate actions, this may have been acceptable, but for the more complex election choices such as dividend reinvestments, share-splits or M&A, then a new setup was needed. Especially as PGGM’s business expanded and the number of corporate actions grew. At the time of writing, PGGM manages over 20,000 asset lines.
Referring to the original workflow, Rene says that, It was a fairly risky process, someone could have lost an email, or an Excel spreadsheet could have been out of date, so we really needed to streamline the process and make sure we could get a proper overview.” Apart from when dealing with dividends, there was no straight through processing, and no automation to speak of. With PGGM dealing with over 11,000 corporate actions a year, then the added burden on front and back office personnel was huge.
Jeroen agrees, saying that, It was a very time-consuming effort for our back office including three steps; obtaining the data, recalculating based on our holdings, and then posting the actual transaction directly to the account or in case of multiple accounts, via static data and create transactions windows.”
Streamlining the process
There were a couple of key goals for improving the corporate action workflow at PGGM, including improving automation, data quality, and having the back office add more value to the process.
In terms of automation, PGGM is striving for an 80:20 solution, whereby 80% of the workflow is automated, giving them time to focus on exception handling and complex cases (the remaining 20%).
According to Rene, their front office operations are already at 90% STP rate. But he notes that the final 10% includes very complex corporate actions which will almost always require a certain amount of manual effort, but for the vast majority, the system works really well. Rene notes that, If I had to guess, I would say we are 3-4 times faster now when dealing with corporate actions in the front office.”