TRW Investment Management Mulls New Barra Software--Global Equity Management

Cleveland-based TRW Investment Management Co., with some $2.5 billion in assets under management, plans to evaluate Barra Inc.'s Global Equity Model (GEM) software in its upcoming release. GEM is a database that can be plugged into the Barra interfaces. Meanwhile, the firm is on the verge of upgrading its desktop--going to Intel Corp. Pentium-class machines with Microsoft Corp.'s Windows 95 as the operating system. TRW Investment Management Co. is a subsidiary of TRW Inc.

Barra is not new to the firm since TRW Investment Management also uses Barra's Windows-based Aegis software product for portfolio management.

TRW Investment Management's primary duties include the management of a defined benefit trust of some $2.5 billion. The firm trades in U.S. large capitalization equities, U.S. fixed-income securities, as well as futures and other derivatives.

According to TRW Investment Management director of investments and portfolio manager Bruce Dirks, TRW has been evaluating Barra's GEM software for about a year. "We ... are looking at possibly managing some international assets internally. So we've been thinking about getting some global equity management software from Barra," he says. Dirks expects a decision on GEM to be made sometime this spring or summer.

With the installation of Windows 95, TRW will do away with its existing Windows 3.1 setup. "We didn't want to be one of the leaders into the [Windows] 95 world. We figured we'd wait six months or so.... The Windows 95 environment seems to be stable enough for us to go into right now," says Dirks. TRW has two portfolio managers, one analyst and one trader.

For desktop hardware, the firm currently relies on Dell Computer Corp. 486s but is planning to migrate to Dell Optiplex 133 Megahertz Pentiums within the next month.

TRW has been using the Windows-based Aegis software since the debut of that product last year. The firm had also been a user of the previous Barra products, Iporch and Activops, which were both DOS-based. Dirks had been using Iporch and Activops before being employed by TRW, where he has been since August of 1993. Before that, he was at General Dynamics, which had been using Iporch and Activops since 1990 or so, says Dirks.

At TRW, Aegis is used to analyze portfolios that are managed by the firm itself, as well as by the other money managers it retains. "In addition to managing money ourselves, we have outside managers that we deal with, so we do analysis on their portfolios with Barra," he says. For TRW's own portfolios, there is a mix of active and passive ones that are managed using Aegis. The firm's portfolio accounting is done by its custodian bank, Pittsburgh-based Mellon Bank.

Dirks says that while he is the only "hands-on user" of Aegis at TRW, other staff members receive the portfolio and risk management output from Aegis. These staff members include TRW Investment Management's president Robert Hamje (to whom Dirks reports), as well as another portfolio manager and an analyst. Dirks has Aegis installed on his PC. He says that the firm might look to increase its number of Aegis licenses in the future.

Before deciding to upgrade from the Barra's Iporch and Activops, TRW evaluated at its offices products from Vestek Systems Inc., Ibbotson Associates, Wilshire Associates Inc., Northfield Information Services and Dais. "I've been using Barra for a fairly long time and I'm pretty happy with Barra's products," says Dirks. According to Dirks, TRW likes Aegis for its ease of use and because Barra "seems to be [an] industry standard and something that you can converse with other people about."

According to Dirks, the largest difference between Aegis and its DOS-based predecessor products lies in the amount of data that a user can analyze. "The number of stocks that you can analyze at any one particular point in time in the Windows version is really only limited by the amount of memory that you have. Whereas DOS had a finite set of stocks that you could analyze," he says.

Other benefits of Aegis include better file sharing, cut and paste and data exchange capabilities between applications. "We use Excel and some other packages and it's very easy to move the data back and forth," he says. In addition to Excel, TRW uses the rest of the Microsoft Office suite of desktop applications, which includes Word for word processing, Access for database management and Powerpoint for presentation graphics.

The firm also relies on daily-updated data from Baseline Financial Services which supplies TRW with Thomson Financial Services Inc.'s First Call data including earnings estimates and other "expectational" data, he says.