BearingPoint assisted the project team, which was responsible for the transition of the pension investment company’s custody bank to Northern Trust and its portfolio management platform to FactSet. The Data & Analytics team worked on the automation of several processes and operations in this transition, among which the development of reconciliation and migration models for the fund’s 34 Billion asset portfolio.
PGB Pensioendiensten is an Amsterdam-based pension investment company. It is a direct subsidiary of Pensioenfonds PGB, a pension fund originally founded for people from the graphical sector, however throughout time numerous other industries have joined the fund. The fund has proven to be ambitious in its growth strategy which led to the expansion of the asset portfolio to 34 Billion euros over the years. By means of this portfolio it presents approximately 440,000 participants and belongs to the top 10 of largest pension funds in the Netherlands. In addition, the fund strives to be innovative and develop itself and its services. This was the reason for the change in custody bank, a bank that stores financial assets and collects dividends, deals with taxes and settles transactions for their clients like the pension fund, and transfer to FactSet’s investment platform.
Development of financial analytical models
BearingPoint helped PGB Pensioendiensten by developing the analytical models essential for the asset portfolio’s transition to Northern Trust. Before the actual migration of assets, the administrations of both banks had to be corresponding, this happened by replicating a shadow administration at the new custody bank which had to be identical to the actual administration at the former custody bank. For example, when the former bank has 100,000 shares of an equity rated at €50 and at the other bank this equity is valued at €49, there would be €100,000 difference between the banks. Considering this is a result of a difference concerning only one security and that PGB Pensioendiensten holds around 10,000 securities, the importance of running a reliable shadow administration before the actual migration is evident. BearingPoint developed a reconciliation model that automatically handled this process by matching the aforementioned securities between both banks, comparing them on several aspects like position, cost price and market value, whereafter the model through visualizations on a dashboard displayed the discrepancies between the individual securities. The difficulty in building this model originated from the fact that the two banks had different accounting structures and that the fund’s asset portfolio is quite substantial and also is diversified into different types of securities (derivatives, equities, bonds, etc.) all over the world, causing the assets to have relatively distinctive and specific characteristics.
After both administrations where in accordance with each other, the fund had to effectively migrate the whole 34 Billion asset portfolio to the new custody bank. Subsequently this process was relying on the models provided by BearingPoint. These migration models could extract the assets in the asset portfolio, link them to the new bank’s portfolio and instruct the transfer. The transfer of securities to Northern Trust was relatively straightforward, since every individual security had a distinguishing identification number and could be linked to a portfolio and therefore connected to the new bank’s corresponding portfolio. However, the transfer of the cash was proven to be more difficult, this originated from the fact that cash does not have identification number and it is harder to link a specific cash amount to a portfolio. Hence this required the migration models to be more advanced and more aftercare in monitoring, tracking and communication with the UK-based asset managers was required.
In addition to the model development corresponding to the change of custody banks, the Dutch D&A team also contributed to the development of regulatory reporting checking models and multiple models that calculated and transferred important financial data, like the fund’s coverage ratio or real estate valuation, automatically to FactSet.
The analytical models provided by BearingPoint have been of significant impact to the transition. Not only was it used in correctly outlining the shadow administration, but also in the successful migration of the fund’s entire asset portfolio.
Author
Maximiliaan Apel, Analyst | Data & Analytics
