Equitable Alliance? Merger Challenge As Firms Look To Unite Disparate Systems

Three weeks after the Equitable Cos. announced the merger of two subsidiaries, Equitable Capital Management Group and Alliance Capital Management L.P., the strategy for bringing together the respective firms' investment management operations remains an open question.

Equitable announced the merger of the two groups last month. Under the plan, which some sources say is still under negotiation, Equitable Capital's business will be transferred to Alliance Capital. In return, the Equitable parent will receive 6.25 million Alliance Capital partnership units, valued at $250 million. The deal increases Equitable's stake in Alliance to 65 percent from 55 percent.

Equitable Capital Management Group is an investment management arm of the Equitable Group, which in turn is owned by Equitable Life Assurance Society. Equitable Capital manages mainly fixed-income instruments including mortgage-backed securities and collateralized mortgage obligations for its insurance company parent.

Alliance, meanwhile, manages portfolios of domestic and international equities and fixed-income securities. The firm has more than $60 billion under management.

Officials at both firms are tight-lipped about systems integration plans, although some sources indicate that the plans are still being hatched. Alliance has installed one of the most sophisticated local data distribution platforms within the investment management community.

Ron Valeggia, Alliance executive vice president and architect of the platform, couldn't be reached for comment by press time. Other Alliance officials say it's too early to talk about technology plans. But one source at Equitable acknowledges that any project to merge to two operations on the same technology platform would be a major one.

In terms of portfolio management systems, the two firms operate disparate systems on disparate hardware. Equitable Capital currently uses the Portfolio Accounting Recordkeeping & Trading System (Parts) designed by the software development arm of BEA Associates. Parts runs on a processor from Hewlett-Packard Co. and uses the Pascal language.

At Alliance, portfolio information at the firm is handled by a proprietary system that runs on a mainframe. Access to the system is available to Alliance's traders and portfolio managers via an Ethernet local area network (LAN) that links these users' UNIX-based workstations.

The merger may present an opportunity for change in the portfolio systems area. Equitable already held some initial talks with other portfolio accounting vendors last year. But according to one source "there wasn't anything else out there." Parts has remained in place ever since.

Alliance developed its in-house system after reaching the same conclusion--that there were no suitable systems available from vendors. Last spring, though, Alliance said it planned to add facilities to its Sybase Inc. relational database management system (RDBMS) that would support a comprehensive accounting database that would be accessible to traders and telemarketing staff.

Elsewhere, Alliance has completed some major system upgrades since 1990, when the firm began an installation of an applications platform for portfolio managers and traders. The platform was intended to cater to the firm's requirements for the next 10 years, and as such is likely to remain.

The platform makes use of Sun Microsystems Inc. workstations linked by Ethernet LAN running TCP/IP. Local data distribution and workstation software is provided by Teknekron Software Systems Inc. While the firm's traders use Suns, portfolio managers and researchers at the firm use 386-based IBM-compatibles. Network communications on the LAN between the PCs and Sun workstations is handled by Sun's Network File System (NFS).

The platform is used to distribute the equities-oriented Reuters Marketfeed 2000 and Bridge Information Systems Inc. BridgeLAN market data services to users' display devices. Bond traders and managers have access to Dow Jones/Telerate's TDPF via the LAN and to a small number of Bloomberg L.P. terminals.