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The Depository Trust & Clearing Corporation (DTCC) announced today that Managed Portfolio Advisors (MPA), one of the industry’s largest overlay management firms with $9.8 billion in assets under management as of June 30, 2011, has signed on to DTCC’s model management exchange service, a new technology platform designed to standardize and automate the model distribution process between investment managers, overlay portfolio managers and model program sponsors. MPA is a division of Natixis Asset Management Advisors, L.P. and part of Natixis Global Associates (NGA).
DTCC, in collaboration with The Money Management Institute (MMI), the national organization for the managed investment solution and wealth management industry, has developed the model management exchange service to align with a shift in the managed accounts industry toward model-only portfolios. These portfolios, the latest version of unified managed accounts (UMAs), merge multiple asset classes into a unified client account that sponsors (broker/dealers) usually customize for their clients for tax optimization and investment preferences.
According to the MMI, UMAs comprised some $123.7 billion of the $2.1 trillion total managed accounts market in the fourth quarter of 2010, up from $61.2 billion of the $1.7 trillion market in the same 2009 period.
“We are excited about the opportunity to work with DTCC, MMI and other industry participants to provide input into the solution at the outset of this initiative,” said Curt Overway, president, MPA. “Flexibility to adapt our process to managers, rather than forcing them to conform to a rigid overlay routine, is a key part of how we work to preserve the integrity of managers’ underlying investment strategies. We are pleased to now offer an additional way in which managers can interact with us and communicate investment decisions in UMA programs.”
Sponsors and investment managers currently rely on disparate systems and ad-hoc processes to manage their model distribution to and from model program providers, resulting in significant inefficiencies and risk within the Model/UMA marketplace.
“As the managed accounts industry shifts away from traditional separately managed accounts to model portfolio formats, it continues to face many of the same operational challenges that created barriers to growth a decade ago,” said Ann Bergin, managing director and general manager, DTCC Wealth Management Services. “What’s different today is the industry’s ability to leverage lessons learned from the SMA market to swiftly build a flexible solution that addresses the operational needs of the Model/UMA market while supporting significant and rapid growth without increased operational risk or burdensome cost. We are confident we have done just that with our model management exchange solution. We are very pleased that Natixis has made a commitment to use our new technology platform as it signals its confidence in our ability to help reduce risks and optimize operating margins for participants in the growing Model/UMA market segment.”
Morgan Stanley Smith Barney, the market’s largest SMA sponsor with $157 billion in assets, signed up for the service earlier this year. DTCC’s model management exchange solution is a service offering of DTCC Solutions LLC, a subsidiary of The Depository Trust & Clearing Corporation, and is part of a suite of Wealth Management Services developed for the managed accounts industry. The service operates on DTCC’s secure and reliable infrastructure, which provides connectivity to virtually all trading parties in the United States.
