sungard advisor technologies unified overlay management program with outsourced overlay management
TRANSCRIPT
SunGard Advisor Technologies
Unified Overlay Management ProgramWith Outsourced Overlay Management
Unified Overlay Management
• Introduction
• Why Overlay Management
• Manager Due Diligence Process
• SunGard Overlay Solution
• Program Benefits
Introduction
At the Forefront of the Managed Account Industry
Unified Overlay accounts are truly the next generation of asset management.
As institutions have expanded their businesses to include fee-based investment services, traditional Separately Managed Accounts are
evolving to what we call Overlay managed accounts – the integration of multiple money managers into a single account.
The SunGard Overlay Solution
• About SunGard Advisor Technologies (SAT)
– Wholly owned subsidiary of SunGard Data Systems
since June 2003 (London Pacific Advisors)
– Original company established in 1983
– Asset consulting services since 1990
– Provider of managed account programs to banks,
RIAs, and broker/dealers
SunGard provides you with access to comprehensive fee-
based investment solutions
Why Overlay Management?
The Demand for Overlay
• Increased industry pressure to deliver best-of-breed managers
• Clients demand more customized and tax-efficient investment
solutions
• Increased focus on straight-through processing and integration
with current trust accounting systems and custodial services
• Overall requirement to keep pace with competitors
• Added focus on fee compression
Traditional Separate Account Management
• Each Separate Account Manager makes investment decisions solely on the assigned investment amount• There is no trading or tax coordination between managers• Access to managers is limited by account minimums • Tax efficiency is limited to the sub- account level • Rebalancing, contributions, and withdrawals are challenging to implement operationally • Platform costs are higher due to more expensive infrastructure needed to support platform
Account A Account C
Client
Advisor
Manager A Manager B Manager C
Account B
Sleeve-Based Overlay Management
• Benefits
– Access to best-of-breed managers– Ability to personalize portfolios– Ability to police tax, trading and
concentration issues
• Drawbacks
– Minimum size requirements– Infrastructure costs – Limitations on degree of portfolio
management Unintended concentrations - risk Unnecessary trading costs Inefficient tax management
Account A Account C
Manager A Manager B Manager C
Account B
Overlay Manager
Client
Advisor
Sleeve-Based Overlay Unified Overlayvs.
Unified Overlay Account
Client
Advisor
Model Portfolio A
Model Portfolio B
Model Portfolio C
Overlay Manager
Account A Account C
Manager A Manager B Manager C
Account B
Overlay Manager
Client
Advisor
Unified Overlay Managed Accounts
• Overlay Manager is responsible for constructing a single portfolio based on the models provided by each of the managers• One set of new account paperwork for one account• Portfolio decisions are customized for each investor • Consideration towards taxes is made prior to executing trades• Overlay Manager controls active risk to the composite target • Rebalancing, contributions, and withdrawals are more efficiently implemented by the Overlay Manager• Lower investment minimums • Lower operational and implementation costs
Unified Overlay Account
Client
Advisor
Model Portfolio A
Model Portfolio B
Model Portfolio C
Overlay Manager
The Role of the Overlay Manager
• Customize portfolio decisions for each investor
• Optimize portfolio performance
• Manage security restrictions and social constraints
• Coordinate tax lot management– Evaluate the trade off of tax cost/benefit versus changes in the portfolio’s risk profile, compared to the target
• Implement account-specific decisions– Coordinated trading – Active tax management– Portfolio transitions– Cash and asset flows, rebalancing– Risk control
SAT’s Due Diligence Process
Manager Due Diligence
• SAT performs institutional-quality research on the managers• SAT’s 16-member Investment Research Group has an average of eight
years of experience • SAT has successfully used a sophisticated four-step screening process for
more than 10 years to obtain and analyze vital information, including specific data which managers are reluctant to disclose
• SAT understands that managers may not be what they seem• Managers that pass SAT’s due diligence process are invited to
participate in the program • SAT contracts with the managers and negotiates fees
Over 50% of our senior professionals have advanced degrees and professional certifications, including CFA® and CIMA
SAT has developed one of the most comprehensive due diligence processes in the industry
Due Diligence Process
Identify Manager Universes
Comprehensive Analysis
Due Diligence Committee
Managers on Approved List
• Multiple databases to identify quality managers
• Screening with 14 measurement tools
• 38-page questionnaire with more than 400 data points
• Meets weekly to review new and updated information
• Approves all additions and deletions to Approved List
• Exception Reporting, performance and portfolio analytics, and quantitative Research
Integrated Team Approach
Qualitative Analysis Qualitative Analysis TeamTeam
(8)(8)
Team Functions:Team Functions:
Qualitative reviews of all products
Site Visits
Research updates, memos on organizational changes, staff,
strategy, other issues
Preparation of MF, ETF, MSP, & No DD profiles
Asset Allocation oversight and reviews
Institutional Services Institutional Services TeamTeam
(2)(2)
Quantitative Analysis Quantitative Analysis TeamTeam
(6)(6)
Risk Management and Risk Management and Institutional Research Institutional Research
Team (3)Team (3)
.
Investment Research Group
Team Functions:Team Functions:
SAM Contracts
Fee negotiations
Custodian Contracts
Client approved lists
Operational setup
Asset Class review calls with clients
Quarterly load coordination
Team Functions:Team Functions:
Preliminary product screening
Quantitative reviews of all products
Research updates, memos of performance, holdings/style, or
risk related issues
Data entry, collection
Preparation of SAM profiles
Preparation of Quarterly Reviews
Team Functions:Team Functions:
Ongoing monitoring of all products
Monthly performance update and asset reports
Quarterly search of news services
Maintain watch list
Audit, proof, edit & QC research work
Institutional Research for major accounts
SunGard Unified Overlay Solution
Turnkey Outsourced Solution
• Designed for firms that are interested in a turnkey unified overlay management solution
– Cutting-edge program that will put your firm at the forefront of the industry
– Provides access to third-party manager models as a method of extending your current investment management capabilities
– Quick program start-up and implementation
– Seamless integration with your current operational activities
Available Overlay Portfolios
Aggressive EquityMaximum
AppreciationLong Term Growth Balanced
Portfolio ObjectivesImplement a single portfoliosolution using a full array of assetclasses
Core Completion ObjectivesAdd value to a client’s existingportfolio with larger capitalizationequity asset classes
Satellite Completion ObjectivesEnhance a client’s existing core portfolio with smaller capitalization equity asset classes
Sample Objectives
Portfolio Objective - Maximum Appreciation
25%
25%8%10%
2%15%15%
Domestic Equity Large Cap Domestic Equity Large CapDomestic Equity Mid Cap Growth Domestic Equity Mid Cap ValueDomestic Equity Small Cap Blend International EquityCash Equivalents
Satellite Completion Objective - Maximum Appreciation
18%
20%
30%
30%2%
Domestic Equity Mid Cap Growth Domestic Equity Mid Cap ValueDomestic Equity Small Cap Blend International EquityCash Equivalents
New Business Development
We help you market the Overlay program with professional, quality presentation and informational tools
• Presentations
• Brochures
• Inserts
• Investment Profiles
– Portfolio Objective
– Money Manager
• Profiling Questionnaire
• Training
How We Work Together
Financial Institution
• Manage customer relationships
• Capture risk profiling information
• Select portfolio objective
• Open account
• Provide performance reports
SunGard
• Conduct manager due diligence
• Negotiate manager fees
• Determine asset allocation
• Manager selection
• Portfolio management and trade execution
• Portfolio rebalancing
• Program liaison and operational support
• Marketing and presentation tools
Benefits of SunGard’s Unified Overlay Management Program
Important Distinctions
• Manage risk with greater diversification at lower investment amounts
• Control what is owned by applying personal restrictions
• Lower cost of entry by consolidating investments into one account
• Gain access to highly-specialized investment managers
• Easy way to add value to current and new customer relationships
• Simplified business processes - multiple client investment products into one account
Customers
Advisors
Financial Institutions
• Free up more resources for building assets by outsourcing the overlay management function
• Access to competitive advantage needed to compete in this ever-changing environment
© 2004 SunGard. All rights reserved.