Hyperion Asset Management has terminated its incumbent custodian for the safekeeping of $200 million in individually managed accounts, after learning that a rival could automatically update its portfolio and cash positions overnight.
Aiming for “total automation” across Hyperion’s operations, managing director Manny Pohl assessed offerings from “everyone that was available” – including the incumbent National Asset Servicing, JP Morgan Worldwide Securities Services, HSBC Securities Services and BNP Paribas Securities Services – but found that only Citi Fund Services could automatically reload the manager’s portfolio and cash positions overnight.
“I wanted to automate this function so it worked while I was sleeping – for example, to know that BHP is out by 1 million shares, or cash is out by 1 million,” Pohl said.
This information, delivered in a daily e-mail, meant that Hyperion’s investment staff do not have to log-on to the custodian’s platform to access current portfolio and cash positions, and are immediately alerted to the source of any anomalies that occurred during the reconciliation process, Pohl said.
“It shows me the account details. If it doesn’t match up, it shows me how many shares are in error or what the differences in cash are. It tells me what portfolio is affected and what was wrong.”
Previously, depending on the nature of reconciliation errors, looking through the boutique’s portfolios and identifying the source of the mistakes could take up to two hours, Pohl said. The automated feed of information also minimised the risk of “trading cash you don’t have”.
Pohl said that most custodians expected the boutique to “check in” with their systems to download portfolio information: “Everyone had that dial-in system, and said, ‘That’s tough luck’.”
While HSBC offered “very keen pricing”, Citi’s delivery of automatic data feeds “was the reason why they got it”, Pohl revealed.
To manage its institutional mandates, Hyperion deals with various custodians, but selects its own back-office services providers for managed accounts, the foundation of its business.