State Street’s Charles River deal appears to have struck a chord with asset managers

Operations executives at asset managers discuss State Street’s front-to-back offering following the acquisition of Charles River.

State Street’s $2.6 billion deal for front-office technology provider Charles River Development appears to have sparked interest within the asset management community.

Despite questions being raised about the valuation of Charles River at the time the agreement was announced, State Street’s goal of improving its front-to-back offering was raised in multiple panel discussions at the InvestOps conference in London.

Mike Tumilty, director of global operations at Aberdeen Standard Investments, suggested data management could be outsourced and pointed towards State Street as a potential solution given its scope of services.

“If you look at that proposition: custody, fund admin, middle-office, they have a GX-type data solution and they just added Charles River,” said Tumilty. “When you add those component parts together, I’m sure there are other third-party service providers who are looking at them and saying, ‘How many parts of the value chain could we poach here from a single supplier?’

“From a strategic perspective, it’s quite appealing from my point of view, looking at the P&L of our organisation to think about being able to buy front-to-back, back-to-front fully configured applications with all of the data having been cleansed, scrubbed, validated, taking all my data feeds in from the Bloomberg, Thomson Reuters, Fitch and S&Ps of this world.”

On the topic of one provider offering a range of solutions, Jim Kearney, global head of investment operations, Vanguard, questioned whether it was a concern for other service providers and technology vendors given State Street’s recent move.

“I see some innovation from custodians and what they are doing with their data,” said Kearney. “With State Street buying Charles River Development, do you worry about innovation coming from that side of the market and that full front-to-back [offering] being one solution that fixes it all?” he asked the panel.

In response, Broadridge’s, Mark Weller, managing director of EMEA asset management, said that some people don’t want to be tied up with an individual platform and that a front-to-back solution isn’t the only way to go.

“If you look at the custodians and fund administrators, again, I think they are the best example of a convergence between ops and tech,” said Weller. “Tech is replacing the ops side of it. Clearly, CRD, Eze, these kind of acquisitions are about getting the full lifecycle.

“In some cases, there is a lot to say for that, but in other cases people don’t want to be tied to an individual platform. Some of those platforms are good at one asset class but not good at another.

“It’s about providing a platform for most of their requirements, but giving them the access to plug and play a bit. If one desk doesn’t like that solution or it doesn’t fit their asset class then they can switch it out and use something else.”

Also speaking earlier in the day at the event, Geoff Galbraith, COO, MAN Group, played down the idea of the front-to-back solution fitting all circumstances.

“A one stop solution doesn’t exist and I don’t think it will,” he said. “We have changed many different operating models. We want to be the best at particular things, but no one can be the best at everything.”

He added that MAN Group had been breaking down the operating models to find the right solution for individual components.

“A front-to-back solution is a framework of where we can identify individual solutions – whether that is Fintech, or outsourcing or a tech solution provider.”

State Street announced the deal in July, claiming the acquisition would significantly boost its front-office capabilities for asset managers through Charles River’s automated provisions.

Charles River serves more than 300 clients across institutional, wealth, asset owner and alternative market segments, including 49 of the top 100 asset managers that in aggregate have more than $25 trillion in assets under management. The firm recorded revenues of more than $300 million in 2017.

The deal is expected to close in the fourth quarter of this year and State Street said it expects the acquisition to be accretive in 2020 and offers “long-term revenue growth”.