Crossing For Plan Sponsors; EPVS: A Buy Side Utility

Another intriguing DECworld demo was the Expanded Portfolio Valuation System -- or EPVS -- from Computer Aided Decisions Inc. EPVS gives major plan sponsors a fund management tool for more active control of both internal and external money managers.

EPVS is indicative of a movement on the part of the buy- side to reclaim controls typically ceded to brokers and outside managers. EPVS enables plan sponsors to improve execution efficiencies through such functions as internal crossing.

In addition to providing the standard bells and whistles of a full-featured portfolio management system, EPVS offers a ticker from Knight-Ridder's Tradecenter, links to trading desks, the research department, and to the Depository Trust Company.

Through its real-time order matching, position keeping, and accounting features, EPVS allows plan sponsors to identify and execute crosses among their own investment managers. The ticker from Tradecenter is processed by DEC's priceserver system, allowing users to route price updates into customized spreadsheets and montage pages.

One of EPVS's biggest boosters is Greta Marshall, investment manager for the California Public Employees Retirement System. CALPERS has $40 billion under management, about half in equities and half in fixed-income. The plan has a large passive core and several smaller, more actively managed portfolios.

Management is shared by internal and external managers. Every morning, CALPERS's internal research staff regenerates its optimal theoretical portfolio, producing buy and sell lists.

Before the markets open, major brokers dial into EPVS to input buy and sell lists of their own. CALPERS's outside managers also input their trades and lists and EPVS matches appropriate orders.

When CALPERS's outside managers want to sell stocks that internal management wants to buy -- or vice versa -- EPVS executes a cross between the orders, updating its portfolio and accounting system instantly. Crosses are pegged to the last price on the ticker. EPVS also handles trades with the upstairs desks at major brokers.

Abel/Noser evaluations of CALPERS's trading effectiveness indicate that EPVS is working very well, according to Marshall. The evaluations, which are performed on every trade, ensure execution effectiveness and protect CALPERS from claims that EPVS executions are effecting the performance of outside fund managers trying to make their bogies or benchmarks.