Eaton Vance Views Market Shock as Opportunity to Enhance IT Capabilities With Strategic Business Growth as Key Goal

Originally published May 11, 2009

Traditionally, Boston-based Eaton Vance, founded in 1924, has focused on offering mutual funds for retail clients, but in recent years the firm has expanded its wealth management and institutional businesses. This has led to Eaton Vance, with $119.3 billion in assets under management as of March 2009, outsourcing certain parts of these operations and acquiring IT tools and services for others, namely a data management system from Eagle Investment Systems Corp., a customer relationship management system from SalesPage Technologies, and the outsourcing of servicing of its institutional business to BNY Mellon Asset Servicing. With this additional support, Eaton Vance can obtain more in-depth views of its business and change its operating processes to meet the demands of a real-time market. Global Investment Technology spoke with John Shea, Vice President and Chief Information Officer, Eaton Vance.

GIT: Given the current environment, what issues are much more important to the business than before? How do you evaluate the environment in which the business operates?

JS: In November 2008, the market really took a dive which increased the need for more transparency into what our book of business looked like and increased the frequency of management reporting we needed. With companies going bankrupt — even countries going bankrupt — counterparty exposure information was more than just ‘nice to have.’ We needed the information quickly. We have been working on consolidating data to provide better visibility into counterparty exposure and manage more quickly and effectively. We purchased off-the-shelf systems including Eagle’s PACE for portfolio accounting and SalesPage. We can analyze information by country, not just asset classes or financial players.

GIT: What other measures became important in these efforts?

JS: Since last year, we have been developing the ability to view daily sales trends by line of business, which seems easy, but sales data is often difficult to shepherd. Daily sales trends are important in a market like this one. We need to know our inflows, outflows, gross sales, gross redemptions and net sales by line of business, for the entire complex, including subsidiaries, on a daily basis.

GIT: Eaton Vance selected Eagle’s PACE system to improve operational efficiency and data quality. What data issues has it helped redress?

JS: Instead of using multiple systems, Eagle allows us to view data or business in a variety of ways. If we know what assets under management are, and can look at business from a line of business perspective as well as from a product or an investment strategy perspective, using Eagle’s master data management, we can define different views of our business and make sure they all add up to total assets under management. This is significant and helps us look at portfolio data multi-dimensionally. We can identify flaws in the data, if they exist, and address them.

GIT: What kinds of new demands has the unfolding market crisis placed on your role and responsibilities?

JS: In some ways, an environment like this is beneficial to all firms as it reminds everyone to be mindful of spending. Although revenues go down when assets go down, we continue to invest in strategic initiatives that will help us grow as an investment manager. The good news is that we’re focusing a lot of our attention on the strategic projects. During better times, you try to work on strategic projects but typically everyone wants everything right now, and it forces you to work on a number of tactical projects at the same time that detract from the strategic projects. Now, everyone is more patient and they recognize that a new system may take some time to implement, but it will be used for the entire firm and result in a broader payoff. Everyone has a lot more patience with that now than they did when the business was in a less challenging environment.

GIT: What are some of the reporting and servicing needs of your wealth management business?

JS: Centralized data, like the portfolio data in Eagle’s product, really helps. The implementation of a major trading system, such as Charles River, has significantly helped the wealth management group from a compliance perspective both in trading and compliance. This system provides value to a private wealth management business and can support individual client needs. It supports the management of money and the reporting required — including details on underlying investments as well as proscribed investment parameters. Several client reports are generated by our custodian, but we also generate them internally. We can now also generate more client reports internally with the buildout of the Eagle system.

GIT: What are the new products and services that institutional and high-net worth clients may be seeking for which you will need stronger IT support?

JS: With the growth of our wealth management and institutional businesses, we have demand for more information about our separately managed accounts, specific client reporting, and client service and feedback on those individual accounts. We are developing additional capabilities and functionality to support our institutional clients. We can currently provide a portfolio view of holdings and performance and we are building the ability to view individual portfolios, analyze trends, respond to RFPs, etc.

GIT: What kinds of projects are on the front burner?

JS: Risk management and compliance-related items. In a time like this, the regulatory pressures are increasing, not decreasing. Recently, Massachusetts enacted privacy legislation which is mandatory. There are several regulatory-driven initiatives that we have on the front-burner. We know there are many new laws in development given the new Administration, and we are prepared to respond.

GIT: What are your guiding principles for managing IT priorities and directing the way you leverage systems development and integration?

JS: We run our IT team like a business. One of our early priorities was the introduction of a time-tracking system. We spent a lot of time listening, assessing the firm’s needs and capturing people’s ideas and we implemented a timetracking system in November 2006, at the beginning of Eaton Vance’s fiscal year. This now allows us to demonstrate to firm leadership how the IT team is allocating time. We are looking at the data by line of business, by project, by individual. Often we leverage this information to make business decisions. Of course, the drive should always be that our time is focused on the investment and sales areas, and less of our time is spent in the operational areas.

GIT: What kind of future are you preparing for, with respect to data volumes, trading strategies and business growth?

JS: We build all our systems with scalability in mind. Whenever possible, we use GRID computing or distributed technologies. We distribute our data movement tool. We want systems that anybody can support. It’s not always possible, but we try to have all our systems real-time enabled. In the next few years, we’re going to move out of a batch world, into a real-time world. The time is fast approaching when we will get data as soon as the bank books a transaction, and it will be delivered as a message directly into our system, and the days of a nightly cycle and batch processing will go away. Certainly it’s going to be something that’s evolutionary, but longer-term, there will be more real-time systems. From a data perspective, there are four data priorities for any investment manager. They include portfolio data, sales flow data, general ledger data and research data. These four ‘legs’ comprise the entire business and are the backbone of the business. They have to be real-time enabled, distributed technologies — solid as can be. Everything else can be fed from those systems.

GIT: Were there data silos prior to the implementation of the Eagle system?

JS: Absolutely. Taking those data silos down is the hardest thing to do. We removed them and now we support multiple trading systems from one central place. At the end of the day, all the compliance rules are in the Charles River Development system. We can take legacy systems and put them into our Eagle system, but the reports have to be customized to the requests from each business. We acknowledge that each line of business does things a little differently; it’s a lot of the same data that everybody else needs, but they view it differently.

GIT: What are some of the new and noteworthy technologies that you are keeping an eye on? What value-added capabilities will they enable?

JS: There will be significant business enablement of devices including the iPhone and BlackBerry. Voice recognition is definitely more ready for prime time. A few years ago, we would have expected to be talking to our computers and that they would do everything for us — typing, responding, etc. It comes as a surprise that technology is not further along, but we believe it’s getting there. At one point, people were uncomfortable talking to a machine, but now everybody walks down the street with a Bluetooth in their ear talking to themselves, and they’re fine with that. You might think people might not want to sit in their office and talk to their computer. It sounds strange. But now people are so comfortable with Bluetooth, it’s just a matter of time before this idea will be more widely embraced.

GIT: To sum up, what is the overall vision at Eaton Vance for outsourcing and deploying technology?

JS: Eaton Vance significantly leverages outsourcing. It is the wave of the future. Doing everything yourself just doesn’t make any sense anymore. We have identified our strengths and we play to them. We engage experts to help us with other things. We do the best we can with our technology but we view our role as integrators. We buy products, we report out of them, we get the data in them, and we get the applications to talk to one another, but we do not focus on developing products internally. Our internal development is focused on integration-connecting these technologies, not building them from scratch. That is complemented by our major service providers, including transfer agencies and custodial banks, and warehousing systems like SalesPage and Eagle.



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