Mitsubishi UFJ Asset Management has increased operational efficiencies and reduced risk by consolidating operations on the Charles River Investment Management System.
Client Profile
Mitsubishi UFJ Asset Management (MUAM) is one of the leading asset management companies in Japan with approximately ¥6.1 trillion under management (US$69 billion) and is a group company of Mitsubishi UFJ Financial Group, the largest financial holding company in Japan. MUAM operates as an Investment Trust Management business and its equity capital is ¥2 billion. MUAM has around 400 executives and staff members and maintains headquarters in Tokyo, branch offices in Osaka and Nagoya and subsidiaries in London and Hong Kong.
Challenge
Japanese asset managers widely employ end-user computing (EUC) tools, such as Excel spreadsheets and Access databases, to execute fund management, trade creation, execution and compliance strategies. Generally, each portfolio management team develops their own proprietary tools and individual processes.
MUAM used to follow this status quo. Before sending orders to the trading desk, manual reviews were routine. For example, because the EUC tools could not adequately support rule volume or complexity, the fixed income teams checked at least 200 compliance rules for domestic fixed income portfolios and over 800 rules for international fixed income strategies.
In 2006, when MUAM’s IT team was asked to manage the EUC tools for the entire firm, they decided to make some fundamental changes. “When the EUC tools transitioned from the business units to our team they had simply become too time consuming to manage, and data consistency was a real issue,” said Masahiro Morino, MUAM’s Chief Manager, Operations & IT Management Division.
“Fund managers and traders had built EUC tools for their specific strategies, but they couldn’t keep up with the quickly changing market and demand for new capabilities.
We determined that MUAM’s investment operations needed a complete overhaul and best practices.”
MUAM identified two main objectives:
- Boost operational efficiencies and achieve a high degree of straight-through processing by consolidating and automating portfolio management and trading workflows
- Strengthen compliance procedures
Charles River Solution
Selection: After quickly dismissing building an in-house application due to high costs, and the challenge of keeping up with ever-changing requirements, the IT planning team identified local and international vendor options for an integrated order and execution management system to fully automate investment operations. The rigorous six month selection process included a series of demonstrations, workshops, discussions and referrals for portfolio management, trading and compliance functionality; technical capabilities for architecture and disaster recovery; and local implementation and technical services. Charles River Development best met MUAM’s criteria across all requirements.
Implementation: Following a phased approach, Charles River IMS was implemented for 35 MUAM business users on the international fixed income and FX desks, followed by the domestic fixed income desk. Charles River simplified the interface process with MUAM’s existing data warehouse (JITA), domestic Japanese accounting systems, market data providers and internal trade execution systems.
In the fall of 2007, Charles River opened its Tokyo office, staffed with bilingual professionals. MUAM’s second project phase kicked off in January of 2009. MUAM management point to Charles River’s expertise and in-language support – both during and after the implementation – as instrumental to the project’s success. Charles River’s implementation team – with their in-depth knowledge of fixed income analytics processing and associated workflows – kept the project on time and on budget. A fully dedicated, Japanese-speaking, Tokyo-based Charles River implementation manager was on-site for the project’s duration. “It was critical that my team could discuss any issue in great detail – and discuss it in Japanese,” said Morino. “Now that we are live, we can call Charles River’s Tokyo support desk, staffed with Japanese personnel, another benefit of having chosen Charles River.”
Benefits
MUAM has achieved its goals of increasing straight-through processing and streamlining business processes, including reducing the use of EUC tools. Charles River’s single, automated platform for all fixed income investment operations gives MUAM business users and management teams access to real-time information across every stage of the investment process, and a centralized database provides data consistency. Extensive auditing options and comprehensive reporting provide advanced risk and exposure management controls. Furthermore, position reconciliation, a previously separate, spreadsheet-based process, is now fully integrated into the trade lifecycle.
Morino points to risk reduction – specifically compliance efficiencies such as real-time pre- and post-trade compliance monitoring – as the single most important benefit of Charles River IMS. The system’s capabilities ensure MUAM is in line with local regulatory requirements, among the region’s most stringent and audit-focused regulations, and its own rigorous internal policies for common Japanese practices such as pre-trade compliance monitoring. For example, automated dual trade authorization processing makes it easy for a second fund manager to sanction and approve each trade before execution. “Charles River has also reduced the frequency of issues that need trouble-shooting in general, and, if issues do arise, it is easy to evaluate them internally,” added Morino.
MUAM traders emphasize that new workflows have improved execution quality by eliminating cumbersome manual processes and shortening the time from order generation to execution. For example, automated order routing means that traders no longer need to manually check each order ticket against investment guidelines.
“Charles River has helped us to improve operational efficiencies and compliance processes. But we also have prepared for the future – the system can handle any product type, including derivatives, which will allow our investment teams to easily expand their product offering going forward,” concludes Morino.