AFTAs 2019: Best IT Team, Buy Side—Charles Schwab Investment Management

This 2019 AFTA win makes it three years in a row for Charles Schwab Investment Management’s (CSIM’s) Investment Technology team. Last year, the team took the honors for providing portfolio managers with a more efficient solution that combined BlackRock’s Aladdin with CSIM’s proprietary platform, SAGE. In 2019, the challenge for CSIM was to build on that success, increasing order flow in bond exchange-traded funds (ETFs).

“Bigger asset managers have big budgets and armies of people, but for us, in ETFs and index funds, the margins are very thin,” says Manish Ghayalod, senior managing director and head of the team. “In a smaller organization like ours, it is important to be able to leverage every component of what needs to be delivered,” explains James Ferrarelli, vice president and head of CSIM’s asset management technology. “We need to be able to leverage our strategic technology platform to support the entire business process and deliver across marketing, sales, investment—across the board,” he says.

A key achievement this year was that the team could think ahead and leverage the Aladdin/SAGE integration for new regulation from the Securities and Exchange Commission. This rule intends to modernize ETF registration and extend certain advantages—previously only available to early entrants in the ETF market—to all market participants. The ETF rules were a potential game-changer for CSIM, so the Investment Technology team focused on capabilities that would fully leverage this opportunity, positioning the firm for a marketplace of custom baskets, rather than authorized participants delivering cash in lieu of baskets. For example, the team built an optimizer to match inventory with capacity for custom baskets. Its work helped the firm to grow ETF assets by 24%, launch three new bond ETFs and scale the business to process multiple orders across multiple ETFs with multiple authorized participants—without increasing portfolio management staff or infrastructure expense.