It’s on Like Donkey Kong: The Battle for the Comprehensive Service Provider Solution Heats Up

Surely, you’ve heard the ancient proverb, “The enemy of my enemy is my friend”? I’ve never been sure if I fully agree with this. Essentially, I understand it to mean that two opposing parties should work together to defeat a common enemy. Call me a skeptic, but I have a hard time believing that people can put aside their differences to work together and more importantly, trust one another. But it does seem to work for the opposing mob families, at least on TV.

This week we get our own anecdote coming straight out of the asset management vendor landscape. I’ll get to this in a second, but first let’s recap recent events that I view as a precursor to this narrative:

• BlackRock Solutions’ (BRS) Aladdin has been considered a force to be reckoned with in the front office for many years and competitors in this space have been looking at ways to dethrone them. BRS have continually invested in their platform, expanding services outside of the front office risk and analytics (Green Package) that they are famous for including data management capabilities, IBOR, and even ABOR data with their Aladdin Accounting solution.
• In July 2018, the long-rumored acquisition of Charles River Development’s (CRD) CRIMS platform by State Street was confirmed. When the deal closed on October 1, they immediately announced their “front to back” solution. As noted in our Outlook 2019: Vendor Viewpoint, this deal was unique and exciting in that very rarely have we seen these acquisitions come with the promise of immediate benefits for the clients using the platforms. Many pundits saw this as a play to take on BRS, a longtime rival of CRD. 
• On the heels of the mega State Street deal, on March 14, 2019, CRD announced a strategic partnership with Axioma to incorporate risk and portfolio analytics into the CRIMS platform, further expanding the capabilities of their “front to back” solution.
• Just over a week later (March 22), BRS answered by entering into an agreement to buy eFront, a leading alternative investment management solution. This acquisition will expand their capabilities into a space that has historically been a challenge to support with traditional asset management technology.

Fast forward to yesterday (April 3). I rubbed my eyes when I saw the press release in the morning announcing that BNY Mellon and BlackRock Solutions have entered into a “partnership” (no ownership changes here, just two firms uniting against a common “enemy”) to “deliver integrated technology and servicing capabilities across the investment lifecycle.” This offering appears to be geared toward common clients of BNY Mellon back office services and BlackRock Aladdin. According to a video released by BNY Mellon, clients will have access to real-time custody and cash data, as well as NAV construction transparency directly through the Aladdin platform. Now I’m not saying that BRS and BNY Mellon were ever enemies (they were not, BlackRock was and is a client of BNY Mellon), but they do have competing solutions in certain aspects.  While my first reaction was, “If today was April 1st, I’d have thought this was an April Fools Day joke” the more I thought about it, the more it made a lot of sense. Both providers have leading platforms in their space and the options to acquire systems and providers to expand services is narrowing with each acquisition. This partnership speaks to the trend that we are seeing very prominently: asset managers looking to simplify their operating models and tech stacks, as well as the demand for transparency (also noted in Outlook 2019).

While there is a lot of interest in exploring one-stop solutions by asset managers, we haven’t seen a lot of adoption yet. But as solutions become simpler to implement through a focus on existing clients, it’s likely adoption will increase. Time will tell if new contracts (i.e. asset managers switching providers) will be driven by these full-suite solutions. There may be a day when decisions come down to who can provide a comprehensive suite of services with the most add-on benefits.

With that said, I don’t think it’s game over yet as the providers look to expand their strategic offerings through further partnerships and acquisitions. I can’t wait to see the next move.