On August 24, Bloomberg announced it had completed its acquisition of Barclays Risk Analytics and Index Solutions. The acquisition includes the intellectual property of the POINT portfolio analytics solution; which Bloomberg will retire in 18 months’ time.
To discuss the effect on RIMES’ customers, we hosted a panel debate at our annual Client Conference in New York. The panel comprised David Bates, Principal at Citisoft; Eric Dyer, Consultant at Citisoft; Steve Cheng, Global Head of Data Solutions at RIMES; and Steve DeTommaso MD, Investment Analytics, at AIG Asset Management Group.
David Bates provided an overview of a recent Citisoft survey, launched to gauge opinions about the retirement of POINT. The results of the survey, which garnered more than 1000 replies, were overwhelmingly negative, and highlighted concern towards Bloomberg’s replacement platform: PORT.
Respondents were particularly concerned that the retirement of POINT will have a negative effect on their ability to perform fixed income functions. Ninety-two percent of respondents use POINT for risk analytics, but 50% do not believe that PORT supports the risk analytics function. As a result, 80% of firms plan to initiate a search and selection for a new platform.
Bates provided an update on Bloomberg’s plans for PORT. Following completion of the BRAIS acquisition, Bloomberg is now conducting client specific communications relative to the migration from POINT to PORT. Bloomberg will be integrating select functionality of POINT into PORT, and has plans to minimize the conversion effort. Bates reported that the PORT roadmap is still a work in progress, and that the long term PORT solution that will be developed leveraging the POINT IP is yet to be determined.
For Bates, there are several key risks heading into the retirement of POINT, the most important of which is time. Regardless of whether firms are planning to integrate PORT into their systems or select a replacement platform, the timeline is incredible tight: firms must make their choice now and act immediately.
Eric Dyer suggested that as POINT was one of the few platforms to concentrate on fixed income, finding a replacement will be difficult. When looking at replacement solutions, Dyer recommended firms ensure any new system adequately covers fixed income considerations such as credit risk and interest rate risk, and is capable of providing market-based models that calculate correlated scenarios to provide contributions to total risk.
For ex-post performance attribution, Dyer suggested firms review solutions to ensure they include the core building blocks of fixed income systems such as correlation matrices; important for understanding risk. Firms need to consider how the decision-making process effected performance relative to the benchmark; including elements such as duration bets, shift and twist effects on yield curve placement and selection effect.
Finally, Dyer noted the importance of access to market data for scenario analysis and stress testing; recommending firms investigate how much historical market events data potential vendors can access.
Steve DeTommaso then provided an end user perspective of the retirement of POINT. DeTommaso noted that AIG introduced POINT in 2003 and immediately benefitted from improved capabilities for ex-ante and ex-post risk. AIG uses POINT in three ways: in production, for data to measure performance against total return; as a desk tool in the public securities department, used for portfolio management; and as a portal to create and customize benchmarks.
From DeTommaso’s perspective there is still much uncertainty around how Bloomberg will evaluate user contracts and create a pricing model for PORT. At present, POINT does not license and charge fees based on users or accounts for POINT, as the license allows unlimited users of the POINT interface. In addition, Barclays is flexible in licensing use of data or reports with portfolio and/or benchmark data extracted from POINT, as long as the data remains within the walls of the user’s firm, including use in performance systems, databases, or reports. Bloomberg Professional terminal users are typically constrained from moving any Bloomberg related data off the local desktop, and sharing with others, including analytics reports. As a result, firms need to be cognizant of potential change in terms of licensing model with Bloomberg.
The session close with a reminder from Steve Cheng on the data implications of the retirement of POINT. A recent customer survey by RIMES found that 78% of respondents use POINT as a source for index and reference data; effectively using the solution as a data management platform to source and distribute fixed income benchmarks. Moreover, 61% of respondents use POINT to customize benchmarks for use elsewhere in the organization. Firms looking to replace point, therefore, need to look at a new data management system in addition to a risk modelling platform.
Overall, the session highlighted that while much remains to be known about PORT, firms need to start making concrete plans now before the sun sets on POINT.