Money Managers Were Busy Buying Portfolio Systems In 1998

NEW YORK--While no one theme or trend dominated the portfolio management software market in 1998, several forces were clearly at work. Overall, it was an active market, with many large money managers installing, or at least signing licenses for, new systems. In some cases, the system decisions followed in the wake of a merger by two large money managers looking for a common platform for their joint operations (see related story, this issue).

Perhaps the most important lesson form 1998's busy market is that it bodes well for vendor prospects in 1999. It also continues a trend that has been underway for at least the last two or three years. Among the year's most successful vendors were SS&C Technologies and Princeton Financial Systems, both of which could boast several large new accounts. Their continued success is a clear sign that the companies made the right strategic decision a few years back when they extended their marketing efforts beyond insurance and into the broad investment management market.

But other suppliers had numerous scores as well, Thomson Investment Software's Portia sold several new licenses as did Financial Models' Pacer.

In the international market, particularly Europe, some of the big winners included DST International's Hiportfolio and Primark Investment Management Services' Icon. But 1998 was also a year when the North American based vendors like Princeton, SS&C, Thomson and FMC extended their market efforts outside their core US market.

Chase Manhattan completed installing Integrated Decision Systems Global Investment Management II for the $155 billion in assets it has under management (April 10). Chase installed GIM II on an IBM RS/6000 server supporting Sun Microsystems Sparcstations. The system replaced a proprietary platform Chase had run on an IBM AS/400 server.

Chase attributed its decision to go to a shrink-wrapped solution and get rid of its proprietary platform because of the challenge of keeping up with the changing products and accounting rules of the investment business.

Chase was hardly the only money manager that shifted from a proprietary platform to a shrink-wrapped system. Other money managers also struggled with the high cost of maintaining older systems and opted out of that strategy in favor of vendor solutions.

By the middle of the year, Oppenheimer Funds went the same way as Chase and turned its back on its proprietary mainframe application in favor of Investar One from Sungard Data Systems (July 3). Oppenheimer hired George Batejan as its chief information officer earlier in the year, and one of his goals has been to limit the growth of the technology budget.

Oppenheimer favored a turnkey system rather than an outsourced application, at least partly to maintain better control over its customer data.

Unfortunately, not every installation went smoothly. For example, Alliance Capital Management struggled to get its installation of SS&C Technologies Camra 2000 in by a year-end deadline (October 9). The deadline was important because Alliance wanted to run a series of Year 2000 tests on the new system and compare the results to those of its existing system, an outdated system called the Portfolio Accounting Record keeping and Trading System.

Meanwhile, Chicago mutual fund company Stein Roe & Farnham was seriously considering getting rid of Financial Models Pacer for its institutional holdings (December 4). The company had installed Pacer five years ago, but its portfolio managers had never been happy with the system's functionality.

In addition, the handful of remaining customers of Data Exchange's WinDX system were in the final stages of getting off that platform and on to systems from other suppliers (December 4). WinDX was never Year 2000 compliant, and many of the customers were unhappy with the decision by Advent Software, which bought Data Exchange in 1996, to discontinue WinDX rather than fix its millenium bug. As such, Advent has promised to continue support of the product until the end of March for the few firms still on it.

Advent's problems with the WinDX user base proved to be an opportunity for its rivals. For example, SS&C Technologies picked up several former WinDX users, including Columbus Circle Investors of Stamford, Connecticut (February 13). Columbus Circle, which is a subsidiary of Pimco Advisors, needed one system to run both its domestic and international portfolios. It had been using WinDX for the domestic side and Advent's Axys for its international securities. The company also wanted a system that ran on Microsoft's SQL Server relational database, and Camra fit that description as well.

Other managers also sought relational database functionality and a common platform for both their domestic and international assets.

For example, Brown Brothers Harriman, the New York private bank, was also considering DST's GPS to replace its installations of Checkfree APL and TIS' Portia (July 31). APL was being used for the company's domestic portfolio, and Portia, with its multicurrency accounting, was used for its international holdings. The review was part of a complete top-to-bottom overhaul at the company, which manages $30 billion assets.

Other system installations, despite encountering problems early on, finally fulfilled their promise after years of struggle. For example, T. Rowe Price went live with DST Belvedere's GPS (September 25). But this came about only after DST revised the system to T. Rowe's specifications.

GPS had once been a set of customizable components, but several clients, including T. Rowe, struggled to implement that version of the product. So DST went back to the drawing board and wrote a set of user interfaces, cutting back the custom work drastically and easing the installation of the product. T. Rowe used GPS to replace a service bureau contract it had with DP Associates of Towson, Maryland.

The Year 2000 issue was also evident outside of North America. For example, London-based Friends Provident completed its upgrade to the Y2K version of DST International's Hiportfolio (June 19). With so many system decisions being driven by systems' Y2K compliance, it's clear that the issue will remain a key theme until the millenium hurdle has finally been cleared (see related story, this issue).

While software companies like Princeton and SS&C expanded outside their traditional insurance market in the past few years, they were still selling plenty of new licenses to insurers.

For example, American International Group signed a license for Princeton's Pam for its $148 billion in investable assets (January 30), and a few months later Prudential Investments licensed Pam for its $40 billion portfolio of private placements (March 27).

In addition, Aetna Insurance Co.'s money management arm, Aeltus Investment Management, also installed Pam (February 27). Aeltus used Pam to replace the IBM-mainframe based Maximis investment accounting system.

Metropolitan Life Insurance signed a license for SS&C's Camra 2000 (June 5), replacing a proprietary mainframe platform.

But both suppliers hardly limited their new customer signings to insurance companies, and both plan to continue attacking the money management market, a good sign that the year ahead will include as many big contracts as the one just concluded.