Overheard at Lunch: Notes From TSAM

Like Hillary Clinton and the Nets, TSAM finally took the plunge and moved over to Brooklyn. It officially has that hipster vibe.

As every year, 2015's Congress was an amalgam of different streams — three of which are relevant to our BST readers — and various different levels of audience participation from room to room (some of them easier for a journalist to deal with than others). None of it disappointed, though.

We'll have a pair of stories from the event coming early next week — one on fixed income and another on data governance — though for now there is a fireside address to chew on from Steve Kahn, the acerbic but entertaining operations chief from an influential family office, Talpion Fund Management.

Oh, and a story from lunch.

Why? Because sometimes the best stuff at these industry events — not just TSAM but Sibos, Waters' own, and others — is what you overhear during the breaks. Indeed, everyone isn't distracted by a speaker (or their phones) and often in these quiet moments, the candid, frustrating truth lets out.

A Right Mess

Now, because they didn't know they were sitting behind a journalist, I'll keep the firm and providers involved to myself. But suffice it to say, around half a dozen technology people from a major, global investment manager had a very colorful conversation about their fixed income portfolio management and accounting functions yesterday — which highlighted just about every complaint we've heard over the trouble with trying to integrate them together effectively.

It went on for almost 45 minutes.

A few highlights:

• The team initially asked for $500,000 to fix the problem. It received only around a fifth of that number.

• On creating a singular book of record (much like an IBOR concept that is currently in en vogue), one staffer said: "The problem is, accounting data and portfolio analytics data doesn't look the same, and shouldn't look the same. We bring these things together and they end up in client reports looking one way, and the portfolio managers come back and scream at us, because it isn't right."

• A little bit of the tail wagging the dog sprinkled in: "Someone from attribution came to us a couple weeks ago and asked, 'how should we render a new set of Japanese swaps we're putting on for the first time?' How am I supposed to know that?"

• And finally, a business colleague's best solution to the problem: "I can help get Executive X involved, if you want. That's the only way I've seen to get things like this moving."

To my mind, the most telling part of all of this was the lack of help that one particular manager seemed to be getting from all sides — both the firm's own business people, which apparently had put the issue on the back-burner a number of times, as well as the name-brand providers they currently use who were sitting on their hands. They all seemed at their wits' end, actually. Understandably so.

Fly on the Wall

There is a lot to glean here. We've had enough real-life illustrations run through Waters' pages in recent years of portfolio accounting mishaps and the oft-expensive, sometimes-successful attempts firms will make at fixing them. But it's still a massive problem many companies are trying to solve, and despite the obvious criticality of the function at hand, they're still trying to do it on the side, and on the cheap.

I wouldn't quite say my mouth was agape as their conversation went on — I was too busy noshing on tasty Teriyaki Chicken, after all — but it was certainly baffling to find out that after all we've heard on this issue, a well-established investment house could still be so far behind the curve.

I suppose that's the benefit of being a fly on the wall and reporting on book-of-record hell, rather than being in the middle of it.