SEPARATELY MANAGED ACCOUNT TRADE-AWAYS RIPE FOR AUTOMATION, FINDS DOVER AND OMGEO RESEARCH

Posted October 14, 2008

NEW YORK – Inefficiency associated with post-trade processing of trade-aways costs the separately managed account industry more than $13 million annually, according to research commissioned by Omgeo from Dover Financial Research.

Trade-aways are trades that investment managers execute off-platform with a counterparty other than the program sponsor, in an effort to ensure best price and quality of execution for less-liquid asset classes. The separately managed account (SMA) industry typically uses trade-aways in volatile markets when essential to execute orders quickly.

“Our research shows that automating trade-away processes will bring the SMA industry one step closer to realizing the full benefit of operational efficiency necessary to spur further product innovations, open new markets and support a fast growth rate as more financial advisors gravitate toward SMAs,” says Jean Sullivan, Managing Principal, Dover Financial Research.

SMA trade-aways are considered highly manual by about 50 percent of managers, according to the Dover research, with about 67 percent of managers surveyed saying that an automated solution for transmitting trade and allocation data would significantly benefit them.

“The use of trade-aways is something that I would expect to continue to grow in the SMA industry,” says Gary Jones, Vice President for Industry Operations, Money Management Institute. “It is clear that the industry needs to be more efficient and reduce manual processing every place that it can. By leveraging technology and the automation of manual processing, the industry can realize significant cost savings and reduced risk.”

Omgeo OASYS, an institutional trade processing solution, could reduce risk and improve efficiency if used for SMA trade-aways, says Tim Keady, Managing Director of Sales and Relationship Management at Omgeo.

“There are certainly best-practices learned on the institutional side that can be leveraged within the retail space, particularly in the world of SMAs,” he says. “We are pleased to provide insight, via Dover’s research, to help the industry determine the best approach to minimize the costs, risks and effort associated with the lack of automation within SMAs and in particular, trade-aways.”