Conseco Scraps APL Service Bureau In Favor Of Turnkey Advent Packages

CARMEL, Ind.-- Conseco Capital Management, the $35 billion investment management division of Conseco Insurance, has gone live on Advent Software's Office for its $600 million equity portfolio. The installation will replace a service bureau Conseco had with Checkfree's APL package for 10 employees, including four portfolio managers and two traders, on the equity side of the company's business.

Conseco is installing Advent's Axys portfolio management system, Moxy trade order management system and Rex trade reconciliation package.

Conseco Capital's remaining 123 employees, including more than 85 investment professionals, will continue using SS&C Technologies' Camra 2000 for the $34 billion in fixed income investments it manages.

While the switch to Advent is underway, Conseco is also carrying out an upgrade to its desktop platforms, says Rich Burke, vice president of information technology. Roughly 10 percent of the company's workstations have already been converted to 450 Mhz Pentium II processors with 96 Mbytes of memory running the Microsoft Windows NT 4.0 operating system.

The remainder will be converted throughout the year. The old desktop environment had been 200 Mhz Pentiums with 64 Mbytes of memory using Windows 95.

Burke says the upgrade will take most of the year while Conseco tests the new desktop configuration with its custom applications.

"We want to make sure it plays well in our environment," Burke says. "We built our own data warehouse, and we have a pretty extensive Oracle database that co-mingles all of our Camra and Advent portfolios. Our analytical systems provide a complete view of all our portfolios."

Conseco is a relative newcomer to managing equity investments, and it licensed APL two years ago to process its small, but growing, stock portfolios. But Nora Bammann, the company's vice president for investment systems, says the equity portfolio managers had been dissatisfied with the text-based APL system and the difficulty of integrating holdings data from APL into their analytical tools.

"Our portfolio managers needed a better trade allocation module, and they needed something that was Windows based," Bammann says. Checkfree "is working toward a Windows based system, but we just couldn't wait."

Jamie Waller, vice president for strategic development at Check free Investment Services, declined to comment about Conseco's decision to switch to Advent.

"The portfolio managers wanted quick access to the configurations of their portfolios so they could do what-if analyses," Bammann says.

Burke says: "The biggest issue was with allocations. As you continue to grow, you build model portfolios, and then allocate trades across all your portfolios."

For example, a company might set an investment strategy for each equity portfolio to have 1 percent of its assets in IBM common stock. A model portfolio is created, and each individual portfolio is run against that model. A portfolio management system, such as Advent's Axys, will instruct the managers exactly how many shares they need to match the 1 percent guideline.

Such tasks weren't easy to do in APL, because of the difficulty of integrating its data with Conseco's Oracle database.

By last year, Conseco had decided it needed to replace APL. It spent most of the second and third quarter of 1998 evaluating systems from several vendors, and by the fourth quarter, it had signed a license with Advent.

The company briefly considered extending its license for SS&C's Camra to its equity portfolios, but Rodney Schmucker, second vice president for investment operations, says Camra does several nightly batch processes on the fixed income portfolios. Given the scale of the company's fixed income holdings, the nightly processes on the equities would have to wait until the fixed income jobs were done.

That led the company to look for another system.

But Michael Morini, SS&C's senior vice president for asset management, says that one of Conseco's concerns was that it acquire a trade-order management system. At the time that the firm's system search was underway, SS&C had not yet integrated its Antares trade order system with Camra 2000.

SS&C's integration of Antares and Camra was finished by last summer, but by that point, Conseco was already close to its final selection of Advent.

Conseco's proprietary analytics let portfolio managers compare their portfolios against the corporate holdings. On the fixed income side of the business, holdings data is extracted from SS&C's Camra overnight into the data warehouse. That information is exported into analytical tools the following morning that portfolio managers use to plot out investment and trading strategies.

The data warehouse uses four Hewlett-Packard 9000 K570 servers running HP/UX Unix and one HP 9000 V220.

Burke says Conseco's analytical tools were written in C++ with a Jyacc Prolifics graphical user interface. Prolifics runs under Unix, and when Conseco was building its analytics in the early 1990s, Microsoft had still not released either Windows NT or Windows 95.

"At that point, you could only get the analytical horsepower you needed in a Unix environment," Burke says.