Case studies
BetaShares
Background
Two and a half years in the planning, BetaShares was launched in 2010 to provide Australian investors with a home-grown specialist in the issues of Exchange Traded Funds (ETFs), one of the fastest growing categories of investment products in the world. Australia had traditionally been regarded as a secondary or even tertiary ETF market by international organizations. Australian-owned and managed, BetaShares fills a gap in the local market and in December 2010 launched its first two products specially designed for local investors: a financials sector (ASX code: QFN) and resources sector (ASX code: QRE) ETF that can be traded on the ASX. These initial funds were joined a month later by Australia’s first currency ETF (ASX code: USD), and the company has plans for further launches that will deliver transparent exposure to a broad range of market indices and asset classes.
Although one of the primary attractions of ETFs is that they offer simple, liquid, transparent, low cost and flexible investment products, they still require a robust operational infrastructure and appropriate portfolio management and trading platforms. Consequently, BetaShares’ management spent a significant amount of time and energy during its planning and development stage, ensuring it had selected the right IT tools to support its operations.
Solution
As part of that process, Cory MacLaren, COO, BetaShares, interviewed a series of vendors and explored their products before selecting Tradar as the company’s portfolio management system. “This is the system of books and records; it’s essential to our business and so a major piece of technology to choose. I had come across Tradar in a previous role, and contacts in the hedge fund space were very positive about both the company and the system. So we spoke to the Tradar team in Hong Kong and we were immediately struck by the evident flexibility of the system and their people’s knowledge and understanding of our business. They really understood what we needed our system to do.”
MacLaren and his colleagues were also impressed with the trial system offered by Tradar. Going beyond the standard presentation and demonstration, the team were able to implement a copy of the solution to experience it in a real-world operational environment, and confirm that its features worked in the desired way.
Nonetheless, some customisation was required during the implementation process. BetaShares has a number of customised swaps that require resetting at different times, other than the standard monthly schedule. It also wanted to reset not just the whole swap but also to separate out the financial charges or dividends and reset them individually in Tradar. MacLaren explains the process: “We worked with the Tradar team who were very willing to customise some of our securities with us, and to build our infrastructure directly into the system. They made it very flexible so, for example, we can reset our swaps on a trade by trade basis, which is an important part of our strategy. With Tradar we can do a two-times delta swap, whereas most other systems can’t handle that unless you’re paying millions of dollars for it.”
The wider implementation process was equally successful. Before work began, Tradar’s team and senior managers spent time talking to MacLaren, as well as the eventual users of the system and BetaShares’ custodian/fund administrator to ensure that it would be set up to meet all stakeholders’ needs. From then on, the implementation process proved to be a seamless, co-operative project. MacLaren adds, “The implementation was a great experience. Tradar was on board and active as a partner throughout the whole process. From day one when we walked them through our structure they worked on making sure it was best set up in the system. They were always available to us and very responsive to all queries. I really can’t fault it.”
He continues, “For a start up, cost is always an issue. And what really impressed us with Tradar is that it is very configurable and easy to fix on the fly, which keeps our costs down. It is always hard to predict what functionality or security types you may need in the future. One of Tradar’s competitors usually brings in a whole consultancy team just to fix things. But Tradar’s office in Hong Kong has remote access to our systems in Sydney, and so they were able to work on the configurations overnight, ready for us the next morning.”
Results
The Tradar system is effectively the backbone of BetaShares’ infrastructure: it is the main platform off which everything else feeds. It integrates into the Omgeo trade matching system and feeds reports to the collateral management system. It is used for reconciliation to BetaShares’ various counterparties and to its custodian/fund administrator.
“It’s been a pleasure working with Tradar,” he finishes. “It’s been a breeze!”