The Importance of Fundamentals in Driving Success

By Lauren Yeaton Hunt, VP, Product Marketing

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As our 20th anniversary year draws to a close, I’m struck by how much the world and our industry has changed in those two decades, and by the fact that – in the face of all of that change – the story of our success is really about fundamentals.

The VestmarkONE® platform was very consciously built on the fundamentally strong foundation of an integrated IBOR and portfolio accounting engine for real-time data, with tax-lot level accounting and daily reconciliation to the custodians.

We continue to believe these characteristics are fundamentally differentiating for our technology. They have been critical in enabling Vestmark to pursue innovations in line with the firm’s strategic vision of transforming the types of portfolio solutions available to investors – bringing personalization, tax management and more sophisticated investment vehicles to smaller accounts.

VestmarkONE was initially launched to transform the SMA business, with tech-enabled scale and efficiency. Soon after, we launched the first-generation UMA, again following the principle of creating a strong foundation – so this early version offered proprietary, transaction-based sub-accounting at the sleeve and tax-lot level. From day one, this enabled multi-discretionary parties to trade in a single custodial account. This meant that our clients could allow third party managers to trade a muni or small-cap sleeve directly if they were not willing to submit models – creating an alternative to simply replacing that asset class with a mutual fund or ETF. The true sleeve-level accounting also enabled GIPs-compliant performance and accurate billing at the sleeve level.

This unique foundation has enabled pursuit of our vision following three core product strategy principles: 1) innovate where we have unique advantages; 2) make our solutions simpler to use – meaning create efficiencies for our clients; and 3) build tools that are easier to integrate – fitting into our clients’ ecosystems rather than the other way around, while maintaining a consistent focus on data consistency and quality.

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For example, we first integrated an optimizer supporting direct index-based, tax-managed portfolios back in 2011. This was made possible and highly effective because of the foundation of having a real-time tax-lot, transaction-based system that’s reconciled to the custodian daily.

As an example of making our solution simpler, Vestmark acquired Lifeharbor in 2004, a firm that had patented heat-maps. From the beginning, VestmarkONE was a rules-based system built for exception-based processing to automate and streamline workflows. This concept of graphical presentation of data, exceptions, alerts, etc. has become an important part of that foundational underpinning.

The technology has really evolved to support all programs – from our roots as SMA/UMA to sophisticated Rep as PM tools for advisors – including trading and risk management for options strategies. Our next-generation UMA solution has evolved to include complex models, dynamic sleeves, support for multiple types of overlay roles, advisor-managed sleeves, and incorporating direct indexing into multi-asset portfolios. We’ve innovated and enhanced the types of fixed income trading supported on the platform including factor-based fixed income modeling.

The foundation has enabled Vestmark to expand beyond pure technology too, although all that we do is rooted in the Vestmark tech. Through acquisitions, we added outsourced back-office services and integrated a proposal tool to the core portfolio accounting/rebalancing platform. We also established an RIA, which allowed us to launch a manager marketplace and begin to offer outsourced overlay and model implementation services.

As we look forward to the next decade and beyond, we’re excited about the possibilities. One thing is certain…Vestmark will continue to follow these principles, continue to build on the strong technology foundation, to listen to our clients, and look for opportunities to help them grow.

By Lauren Yeaton Hunt, VP, Product Marketing