Merrill Lynch Raids Morgan Stanley For New MLAM Technology Officer

PRINCETON, N.J.-- Merrill Lynch Asset Management has hired Sean Kelley, until last month a managing director for information technology at Morgan Stanley Asset Management, as its chief technology officer.

A Merrill spokeswoman confirms Kelley is due to begin at MLAM on April 1 and will be one of two executives reporting to Rod Steel, head of technology for the Asset Management Group at Merrill Lynch. The other is Kryss Brady, head of technology for Merrill Lynch Mercury Asset Management in London, which Merrill acquired in November 1997.

At press time, attempts to reach Kelley were not successful, and Steel was not available for an interview.

MLAM employees were notified earlier this month via electronic mail that Kelley would be joining the company. A person who picked up Kelley's phone extension at Morgan Stanley told IMT Kelley had left the firm in mid-February.

A Morgan Stanley spokesperson says Kelley was responsible for information technology for Morgan Stanley's institutional business, but would not discuss the company's plans to replace him.

Steel, before taking his current role, had been chief technology officer for Mercury in the UK, but he was promoted to oversee technology for all of Merrill's buy-side businesses after Mercury was acquired (Institutional Trading Technology, Nov. 13, 1998).

Steel reports directly to Merrill's corporate chief technology officer, John McKinley and Jeff Peek, executive vice president for the Asset Management Group. In a development unrelated to Kelley's hiring, the longtime chairman of Merrill Lynch Asset Management, 66-year-old Arthur Zeikel, announced last week that he would retire after 23 years with the company. Zeikel became MLAM's president in 1977 when it had only $300 million in assets under management and was less than one tenth of one percent of its current size.

Kelley joins Merrill roughly six months after his predecessor, long-time MLAM technology chief Michael Tahan, left the company to become technology chief for National Life Insurance of Vermont in Montpelier, VT.

Kelley's hiring satisfies what Steel classified as his top priority for the coming year. In an exclusive interview last November with Institutional Trading Technology, which like IMT is published by Waters Information Services, Steel said that after a new technology chief for MLAM was selected, he wanted to focus on new projects.

But Kelley is joining MLAM during what is described by sources as a tumultuous time for the information technology department, there. Several key systems are in a state of transition, and delays in resolving some long-simmering technology issues have reportedly led to a high degree of discord among senior staff.

UK-based Mercury is installing Thomson Investment Software's Portia to supplement the portfolio management and accounting for its current fixed income system, Biton. Two years ago, prior to the Mercury acquisition, MLAM licensed Portia for its London fixed-income business, and Mercury's use of the system is apparently an extension of that earlier contract.

But a Mercury spokesman in London says the company will keep its current equity portfolio accounting system, Fumes, for Fund Managers Equity System, which is a service bureau with the Royal Bank of Scotland Trust. Sources say Mercury is paying £30 million annually for this contract, which does not expire for another two or three years. The Mercury spokesman would not discuss the terms of the contract. Royal is also Mercury's custodian bank.

Sources say the decision to stick with Fumes reverses Mercury's earlier plan to shift all of its accounting to Portia.

At roughly the same time that MLAM elected to go with Portia in London, the company bought Hotchkis and Wiley, a Los Angeles-based institutional money manager. Responsibility for Hotchkis was turned over to Mercury, which assumed management for all institutional business, after the merger with Merrill. Hotchkis does its portfolio accounting on a system from the Citibank subsidiary Crossmar, but sources say there are no plans currently to move off this platform.

The decision to install Portia at MLAM's London office led to a decision to replace Sungard Data Systems' Invest One, which had been the incumbent institutional platform for the institutional business at MLAM headquarters in Princeton, NJ.

The overwhelming majority of MLAM's business is weighted toward mutual funds, and that business is still being processed via a service bureau from DST Systems of Kansas City.

In the meantime, Merrill is also phasing out a proprietary portfolio management system called Gamut for its high net worth individual business. Some of the high net worth accounts will now be managed as part of the institutional business, and are now being converted to Portia. The remainder of the high-net worth business is being converted to Advent Software's Axys.

Gamut was originally written for an IBM RS/6000 server, but last year MLAM planned to migrate that platform to a high-end IBM SP2 processor to handle future growth. That effort was shelved once the decision was made to convert some of the accounts to Portia and the remainder to Axys.

Last year, Merrill also completed installing Red Brick Soft ware's data warehouse and the Copernicus messaging middleware from VIE Systems of Hoboken, N.J. (IMT, July 31, 1998).

After briefly considering using Charles River Development's Trade Master as a replacement for its current trade order management system, MLAM decided to stick with the Merrin Financial Trading Platform. But that decision called for MLAM to pay Merrin a hefty sum to make the software Year 2000 compliant. Merrin had first asked MLAM for $2 million to complete the Y2K effort, although it's not clear what MLAM ultimately paid.

Other applications used by MLAM include Financial Models' Sylvan for performance measurement. Hotchkis and Wiley uses Financial Models' Pivot for pre-trade portfolio modeling.

From an organizational perspective, Merrill is said to be lining up all its asset management businesses globally under one roof. Managers of groups like Hotchkis and Wiley that had once run themselves largely autonomously are now reporting directly to Merrill and Mercury executives. This pattern is being repeated in buy-side businesses Merrill has acquired in Canada, Australia and Thailand. Although MLAM's license for Thom son Portia is being extended to some of Mercury's operations, it's not clear whether the organizational consolidation is also being extended to technology and operations globally.

Morgan Stanley Asset Management, which has approximately $376 billion in assets under management, uses Integrated Decision Systems' Global Investment Manager II as its core portfolio management and accounting system. The institutional business where Kelley worked includes Miller Anderson & Sherrerd of West Conshohocken, Penn.