Business Context and Challenges

One of the world’s largest fixed income investment managers, with over $2 trillion in assets under management, embarked on an ambitious initiative to expand into active equity management. Under the leadership of a newly appointed CEO (a former senior U.S. Treasury official who had overseen the TARP program during the Global Financial Crisis), the firm aimed to diversify its business by launching four distinct equity strategies:

  • Deep Value
  • Emerging Markets
  • Dividend Income
  • Long/Short Equity

The primary challenge lay in building an entirely new equities business while leveraging an existing infrastructure optimized for fixed income and OTC trading. The firm’s legacy systems and operational workflows were designed for:

  • Fixed income trading and settlement
  • OTC market operations
  • Complex derivative instruments
  • Institutional fixed income compliance requirements

The new equities business required fundamentally different capabilities for:

  • Listed equity trading
  • Exchange connectivity
  • Real-time market data processing
  • Equity-specific compliance rules
  • Different settlement cycles and processes

Strategic Planning Phase

Strategy Development

The initial phase focused on creating a comprehensive strategy that would enable the new equity business while maximizing synergies with existing infrastructure. Key strategic initiatives included:

  • Gap analysis between existing fixed income infrastructure and equity requirements
  • Evaluation of current trading architecture’s adaptability to equities
  • Assessment of vendor solutions with focus on Bloomberg’s integrated suite
  • Development of business case highlighting infrastructure reuse vs. new build
  • Creation of detailed 18-month implementation timeline
  • Resource planning across technology and operations teams

Target Operating Model Design

A future-state target operating model was designed through extensive collaboration with:

  • Portfolio Managers of each strategy
  • Trading desk leadership
  • Operations teams
  • Compliance officers
  • OMS vendor (Bloomberg)
  • Investment accounting vendor
  • Global custodian

Key elements of the target operating model included:

  • Strategy-specific trading workflows for each investment approach
  • Integration with existing middle/back office functions
  • Adaptation of fixed income compliance framework for equities
  • Real-time position and exposure monitoring across asset classes
  • Automated broker selection and execution optimization
  • Centralized post-trade processing and reconciliation

Platform Roadmap

The 18-month transformation roadmap was structured to rapidly enable basic trading capabilities while progressively enhancing features and operational integration:

  1. Rapid Launch Phase (Months 1-3)
    • Core trading and compliance capabilities implementation
      • Basic Bloomberg AIM OMS setup
      • Essential EMSX trading workflows
      • Critical CMSX compliance rules
      • Minimum viable middle/back office processes
    • Bare bones operational procedures for:
      • Trade processing and settlement
      • Basic reconciliation workflows
      • Essential reporting requirements
      • Minimal risk controls
  2. Enhancement Phase (Months 4-9)
    • Trading Platform Maturation
      • Advanced order management features
      • Sophisticated execution algorithms
      • Complex compliance rule implementation
      • Enhanced risk controls
    • Operational Workflow Optimization
      • Automated reconciliation processes
      • Advanced reporting capabilities
      • Refined middle office procedures
      • Enhanced settlement workflows
      • Broker relationship management
      • Custom trading analytics
  3. Integration and Optimization Phase (Months 10-18)
    • Fixed Income Infrastructure Integration
      • Unified position keeping
      • Consolidated risk management
      • Integrated compliance monitoring
      • Streamlined operational workflows
    • Process Refinement
      • Cross-asset class reporting
      • Unified middle office procedures
      • Consolidated settlement processes
      • Integrated broker management
      • Enterprise-wide risk monitoring

Engagement Evolution

The project evolved through three distinct phases:

Advisory Phase (Initial 2 Months)

  • Assessment of current state capabilities
  • Gap analysis for equity trading requirements
  • Recommendations for platform selection
  • High-level roadmap development
  • Initial operating model design
  • Preliminary cost estimates
  • Risk assessment and mitigation strategies

Consulting Phase (Months 2-4)

  • Detailed implementation planning
  • Vendor selection and negotiation
  • Process design and documentation
  • Staffing model development
  • Training program design
  • Risk management framework
  • Operational procedures development
  • Performance metrics definition

Implementation Phase (Months 4-18)

  • Platform implementation oversight
  • Workflow optimization
  • Integration management
  • Operation procedure refinement
  • Performance monitoring
  • Issue resolution
  • Change management
  • Knowledge transfer
  • Documentation and training

This roadmap laid the groundwork for a modern, efficient trading platform that would support the firm’s expansion into equities while maintaining robust risk management and compliance capabilities. Parts 2 and 3 of this series will explore the STP workflow implementation and system integration aspects of the project.