State Street's Mapmaker

Article excerpt


Something like a scene in this summer's blockbuster movie The Mummy has befallen Stan Shelton and the masterminds of State Street's In the movie, adventurers stumble into a cave, which by torchlight reveals the treasures of dynastic Egypt. Shelton exhibited some of this awe when State Street gave him the go-ahead to begin developing a proprietary site for fund managers and plan sponsors that delivers a spectacular menu of analytics and flowof-funds information based on the huge data set available to State Street via its $4.7 trillion portfolio of assets under custody. He's like a banker who has stumbled on King Tut.

"What we realized when we fully thought through what we could do with Globallink," says Shelton,"was that we could add enormous value to the information already at hand. Someone once said to me that the world has tons of information about prices but nothing about quantity." He adds: "What we're doing is offering the first high-frequency-level quantity data available."

Like all custodians, State Street handles reams of information about the investments in its custody portfolio.This information is distilled and distributed electronically to money managers and plan sponsors. Looking after these data is more than a simple custodial task. Delivering the information in a palatable and concise manner-all electronically-is one way in which custodians vie with each other to win clients in a business that has, as the phrase goes, become increasingly commoditized. The interpretation of information about the flow of those investments and their effect on markets is a specialty that only the largest custodial banks could deliver.

Shelton moved to London as general manager of State Street's office in 1989, fresh from a two-year stint setting up the company's treasury division in Hong Kong. It was in London that he and other executives at the bank began talking about the possibility of mining State Street's trove of flow-of-funds data. "We have annual brainstorming meetings, and we began talking about new ways to package the information at our disposal and making forays into the academic community." The talks continued through 1993, when Shelton says they had a "better idea of what we wanted to do, although we realized that the network capabilities were simply not yet available for us to realize our goals." That's when State Street struck a partnership with Bridge Information Systems, a company that offers trading systems and realtime market information via its server over local area networks to money managers. The partnership gave State Street the infrastructure to deliver the data directly to its client base over a Bridge network. The idea was to create a system that both allowed on-line trading in currency and equity markets and delivered analytics and strategy tools designed specifically for fund managers.

With the delivery capability intact, State Street began designing the service for money managers that Shelton describes as "aa way to unify the investment process from idea generation to portfolio construction and risk measurement to trade execution, settlement, and confirmation. We also wanted to integrate on-line currency, equity, and cash trading capabilities with the entire investment process. …