Unwilling To Roll Its Own, Templeton Begins To Shop


After determining that it is better to buy than to build a portfolio accounting system, Templeton Worldwide Inc.--a Fort Lauderdale, Fla.-based investment management firm with some $43 billion in assets under management--is shopping for a replacement for its incumbent system, Maximum Data Corp.'s International Portfolio Management System (IPMS). Templeton is a subsidiary of financial holding company Franklin Resources Inc.

According to Martyn Greene, senior vice president of information services at Templeton, for most firms, buying is preferable to building because the former takes far "too much effort.... Getting the accounting right and getting the transaction processing right is very tricky to do. You can sink a lot of money into that."

Reiterating strongly worded comments he made at a recent industry conference, Greene told IMT that user firms are not meticulous enough to build systems properly. "What people do is they rush off and they don't do the accounting right and they do the whistles and bells that attract people. Only when people install the systems do they find that the fundamental accounting doesn't work. And then they build all kinds of stopgap measures to get around that. Well, at that point, you're in the wrong place," he says. "I don't know anybody who can successfully build their own securities accounting software and not make a mistake."

Templeton's search for a new portfolio accounting system has also been propelled, at least in part, by its acquisition by Franklin Resources in July 1992, Greene says. He asserts that Templeton--which specializes in mutual funds but also manages some "private money"--and San Mateo, Calif.-based Franklin, which has some $70 billion in assets under management, use two disparate portfolio accounting systems. While Templeton employs Maxdata's IPMS, Franklin uses an older, now defunct Digital Equipment Corp. VMS/VAX-based system dubbed CPORT--a product that was developed and marketed some six years ago by a competing money manager. Now, says Greene, "I guess it's almost like we're all one firm, [so] we should be on one accounting system."

However, Greene says that while finding one system to handle Franklin and Templeton's combined $113 billion portfolio would be ideal, it is not a given that the two will end up on the same platform.

"We have a need to change our accounting system, like all other firms," says Greene. "[But] we're not going to force a square peg into a round hole just to get on one system.... If we can get on one system, that would be great. But if we find that there isn't one system that can support all our areas of business, then we'll certainly consider two systems."

Greene declines to comment on the portfolio accounting vendors Templeton is evaluating, but a source close to the firm says that the list of systems Templeton is checking out includes Thomson Financial Services Inc.'s Portia, Securities Software & Consulting Inc.'s Camra and Sungard Investment Systems Inc.'s Invest One. This source says that six systems are still in the running for the Templeton account, but declines to specify the other three.

Once Templeton makes its portfolio accounting software decision, Greene says that a change in hardware platforms is inevitable. But Greene says that the hardware the portfolio accounting software runs on is not a real concern. "We won't be driven by the hardware, we'll be driven by the application," he says. "We'll pick the hardware that suits the size of the application, based on the software." The Maxdata system currently runs on Wang Computer Ltd. PCs.


News of Templeton's search for a portfolio accounting system, as well as the firm's rejection of the homegrown approach, emerged during a recent speech Greene gave at the Re-Engineering Investment Management Trade Operations conference in New York City. The conference was held Jan. 30 and 31.

But Greene did not advocate off-the-shelf systems for all aspects of a buy-side firm's operations. In his talk, Greene--who lectured a group comprised mostly of fellow money managers--also emphasized the importance of building "information systems and technology in the areas that make your [firm's] business unique."

When it comes to information systems, for instance, according to Greene, buy-side firms should make having total control a priority. "In Templeton's case, what makes [the business] unique is its research methodologies, its portfolio investment folk, trading and accounting, geographic dispersal and the way it handles that in a typical evening," Greene says. "It was also acquired by Franklin Research two years ago, so you've got a merger in there that complicates things. Those are the things that make [Templeton] a somewhat unique environment and if you don't have control of those things ... you can run into problems. My recommendation is to build that piece [and] buy securities accounting software.... An information system built by your staff is under your control."


In addition, under a section of his speech entitled "What Goes Where," Greene says that firms should either buy or build a separate trading system to complement the information and accounting systems.

If a firm decides to implement both an information system and a trading system, it should either "build the trading system and wrap the information system around it" or buy the trading system and feed the information system from it, Greene says. In either case, he says, the "portfolio accounting system should be fed completely, except for cash, by the front end."

Greene says that by maintaining the front-end--i.e. the information and trading systems--a firm could upgrade or buy a new accounting system about once "every two years, if you like."

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