Bank technology provider of the year: UBS

Neo platform proves its mettle for actively managed certificates

jonathan-roberts of UBS
Jonathan Roberts, UBS

UBS's actively managed certificates (AMCs) have been developed over the past 18 months as a fully packaged investment strategy, relieving portfolio managers of the operational burden of running a strategy and allowing them to focus instead on investment decisions and asset allocation. The use of the bank's Neo platform to deliver a single point of access for AMCs has been the icing on the cake.

"It has good reporting features and we can pull out specific data on underlying instruments, which no other competitor to UBS can offer," says Thomas Ritter, managing partner at Rational Invest, a Swiss investment adviser that began using UBS Neo in July 2015 after discussions with several providers.

AMCs are UBS-issued securities linked to a reference portfolio that may contain multiple instruments across asset classes. Roughly 85% of AMCs are currently linked to cash equities and equity indexes, but the product's diversity is increasing.

"In the coming weeks, we've got forex, forwards and then listed options coming through for year-end. There is quite a well-defined release cycle. We try to do a release every four to six weeks. We are seeing growing demand for incorporating call-overwriting strategies as well as both passive and active currency hedging," says Jonathan Roberts, a trader in the global investor solutions team at UBS.

The use of the Neo platform, which was rolled out to clients from 2012 after a two-year development period, gives investment managers greater control over their portfolio of AMCs via a single point of access. While Neo supports a broad range of products and services provided by UBS, it also includes functionality specifically for AMCs, including execution, post-trade services, risk and valuation.

We do try to break the records to acknowledge an AMC

Neo delivers a series of reports to AMC holders, including valuation statements that are calculated from internal risk systems and approved by UBS's valuations department. The platform also creates corporate action reports that give a history of corporate action events and highlight scheduled future actions, such as ex-dividend dates. It also generates detailed investment performance reports.

"On the summary landing page, a manager can see the total amount of outstanding certificates, the current value of the AMC underlyings, the last time they did a rebalance, and total assets under management. The landing page also serves as an activity blotter. Should a manager initiate a rebalance, that will kick off a workflow that will pop up in the top part of his window and give detailed feedback on where in the process the rebalance is, whether it has been acknowledged by UBS and whether it has executed," says Roberts.

The speed of execution on Neo is a big differentiator, Roberts adds. Once a rebalancing order is submitted onto the platform, UBS is able to acknowledge it within seven seconds, giving clients confidence that the bank's trading desk is watching over their investments.

"We do try to break the records to acknowledge an AMC and can complete an ‘at market order' with the full rebalance report available to the client within a few minutes," says Roberts. Investment managers have the flexibility to submit specific amendments to the rebalance order prior to execution if they have a change of heart.

Portfolio managers also have the freedom to choose their favoured execution method when rebalancing, while real-time updates provide the status of the rebalance request. Once the rebalancing is complete, Neo provides a detailed breakdown of the price of all executed trades and generates a complete audit trail for the investment manager's reference.

"They can use the calendar control function to search for any rebalance that was done at any time since the instrument went live, and have full access to historical valuation statements," explains Roberts.

Recent additions to the AMC product range include a quanto forex capability, which actively hedges the currency exposure of underlyings within the certificate. This feature was added specifically in response to a client request. UBS's ability to introduce such features quickly is testament to the bank's commitment to what Roberts calls "agile development".

"We can address issues that clients raise, from simple functionality tweaks to the rebalance tool, to something more detailed such as the quanto hedging or the rolling out of new asset classes on the platform," he says.

The flexibility and user-friendly nature of Neo has won the platform widespread support. "UBS's Neo is the best platform in the market for AMCs. It offers an easy and quick way to execute rebalancings, find information on different underlyings and create synthetic reports. We also have a lot of flexibility in terms of how we execute different orders," says the head of structured finance advisory at a Swiss private bank.

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