Through the new alliance, investment firms that handle tax-sensitive managed accounts will benefit from the combination of InvestEdgeâs portfolio management overlay platform, InvestEdge ASP, and Northfieldâs Open Optimization software. The partnership will enhance InvestEdge ASPâs portfolio management, trading, rebalancing and client reporting capabilities with Northfieldâs advanced analytical tools which enable investment managers to measure risk and create the best possible trades for their customers on an after-tax basis.
âThe integrated solution is ideal for firms where investment managers handle large numbers of high value accounts,â said Bob Stewart, CEO of InvestEdge. âMost managers are not currently monitoring the risk factors of each portfolio by incorporating the tax circumstances of the investor and the tax considerations of the existing portfolio. As a result, managers are often unable to respond promptly to new information about market conditions while concurrently considering the myriad tax implications of proposed portfolio changes.â
The addition of Northfieldâs Open Optimization software to the InvestEdge system addresses this challenge with open, analytical risk models that include most marketable securities traded worldwide. The models analyze each portfolioâs factor âbetsâ and suggest buys and sells. As a result, hundreds to thousands of taxable accountsâwhich are managed through InvestEdge ASPâcan be rebalanced in a fraction of the time required by traditional means. The algorithms used to calculate the proposed transactions are completely transparent, which allows investment managers access to all factor data and underlying assumptions used to calculate risk.
Once rebalancing has occurred and been accepted, transactions can be passed directly from InvestEdge ASP to a trading system, enabling straight-through processing. Further, InvestEdge ASP can produce customizable reports to demonstrate the before-and-after impact of transactions.
âThe combination of Northfieldâs industry-leading tax optimization technology and risk analytics with InvestEdgeâs industry-proven wealth management platform enables investment firms to trade off risk and return during the rebalancing process using a consistent industry-accepted methodology across all portfolios and strategies,â said Dan diBartolomeo, President of Northfield. âThis platform allows firms to scale their operations with less cost and represents a significant step toward simplifying the management of taxable accounts.â