Adoption & Implementation: A review process and regimen of education to infuse the open architecture process into the organization's business model and day-to-day, practices.
"Brandable" Client Experience: The application and recognition of a consistent client experience associated with the organization.
Closed Architecture: A group of investment management disciplines or investment management firms where the vendor restricts access to a limited number of disciplines or firms. The vendor may have a proprietary relationship with the investment management firm or firm providing an investment model.
Custodian: A bank or brokerage firm providing settlement and safe keeping services and a reporting and reconciliation relationship to a bank's trust accounting platform.
Due Diligence: With respect to open architecture applications, research and documentation regarding investment rationale for the employment of third party investment management firms or investment disciplines to complement the bank's core investment process.
Interface: With respect to open architecture, software functioning as a data bridge, also knows as middleware, between one or more vendors ultimately allowing reporting into a bank's trust accounting platform.
MAP: Multiple Attribute Portfolio - A term used more frequently during the early evolution of the open architecture industry. MAPs are portfolios using more than one - usually between three to five - distinct investment disciplines and/or asset classes to manage systematic risk within a portfolio.
Middleware: With respect to open architecture, software functioning as a data bridge, also known generically as an interface, between one or more vendors ultimately allowing reporting into a bank's trust accounting platform.
Model: As differentiated from an SMA, a replica of a third party investment discipline transmitted to and executed by a vendor on behalf of a bank usually working in conjunction with an overlay software application within a UMA process.
Open Architecture: The ability to employ and coalesce all investment disciplines, investment management firms and asset classes in an unrestricted manner into one client's investment portfolio. Somewhat of a misnomer. True open architecture is the ultimate goal. Some managers and/or asset classes are not available or well represented, yet and different vendors have enabled varying solutions to meet the promise of open architecture. Best viewed as a continuum ranging from closed architecture through open architecture.
Overlay: A sophisticated software engine employed to drive a UMA process. Enables scalable and consistent application of investment process by laying single or multiple investment disciplines over multiple accounts; each with different, individualized account objectives and investment guidelines and automates / coordinates / varies the sensitivity in security selection relative to tax, risk, and expenses.
Platform: A vendor's proprietary application to deliver open architecture often including some combination of individual investment managers, models, due diligence, overlay relationships, sponsorship, proposal & presentation capabilities, middleware, performance & attribution and reporting.
Proposal & Presentation Package: A software application - sometimes standalone - that is used to compile investment performance, "what if" scenarios, and client & prospect formal proposal / presentation tools.
SMA: Separately Managed Account -- Also referred to as "traditional third party architecture," SMAs are individual accounts allocated to third party investment managers by investment discipline and managed and traded in sub accounts, outside the bank and are reported to the bank's trust accounting platform for reconciliation and consolidation.
Sponsor: A technical SEC definition regarding the entity that is responsible for organizing and maintaining a specific open architecture offering provided to a bank. See SEC term definitions: http://www.sec.gov/pdf/adv-glossary.pdf
Sub Account: With respect to SMAs, a portfolio allocation outsourced to a specific investment management firm that is managed and traded separately within a defined investment discipline and then reported individually by each separate third party investment manager to the bank to be consolidated and reconciled on the bank's trust accounting platform.
TAMP: Turnkey Asset Management Platform - A comprehensive, "one stop shopping" offering from a vendor to a bank, providing all aspects of the open architecture offering for one unified price expressed in basis points.
Tax Management: With respect to overlay within a UMA process, the use of an overlay function to manage individual client tax sensitivity including tax-loss harvesting, tax budgeting, tax minimization, put option modeling, individual tax implications, wash sales and intra-client security swaps.
Tracking error: A multi-factor risk model typically using six variables to measure "closeness" of a portfolio or individual security to a model. The technical definition of tracking error is "the standard deviation of the difference in the expected annual returns between two portfolios."
Trust Accounting Platform: A sophisticated enterprise software providing operations, reconciliation, settlement, custody interface and client / regulatory reporting package providing principal and income accounting to fiduciaries.
UMA: Unified Managed Account - A process of portfolio synchronization using overlay software to coordinate and individualize the investment process by account objective, asset allocation and security selection with variable sensitivity to taxes, risk, and expenses across discrete, complementary investment disciplines.
Unbundled Services: The ability to segment an open architecture offering into discrete components by contracting with individual vendors, each supplying a niche application of a bank's open architecture offering, in total. The opposite of a TAMP.
Vendor: A provider of an open architecture offering in either a TAMP or Unbundled format.
© 2007 Winslow Capital Group, LLC
This document is proprietary intellectual property of Winslow Capital Group, LLC and may not be disseminated to third parties without compensation to and written permission from Winslow Capital Group, LLC.