We asked four members of NeuGroup’s peer group universe how they used their Bloomberg Terminals.
Continued Urgency on Process Improvement and Resource Optimization
OpenText uses Bloomberg to save on FX trading costs.
Founded in 1991, OpenText is a leader in Enterprise Information Management enabling businesses to grow faster while lowering operational costs. The company also specializes in reducing information governance by improving business insight, impact and process speed.
Qaisar Majeed, Director Risk and Corporate Finance at OpenText is responsible for FX operations and says that utilizing the FX functionality from Bloomberg allows his team to work faster and smarter.
With Bloomberg’s FXGO functionality, Mr. Majeed can request live, executable prices simultaneously from all of his banks so he can identify the best offers while having the option to spread FX trade business to various banks. “It is important for us to spread our FX business among several banks and by using Bloomberg, I am able to ensure the proper allocation of business”, said Mr. Majeed.
FXGO provides access to a large community of FX professionals and enables users to trade world currencies from a rich pool of liquidity. It also offers comprehensive post-trade reporting for both the buy-side and the sell-side. Mr. Majeed and his team use Bloomberg’s premier multi-bank FX trading platform to request quotes for a variety of FX instruments. They view the quotes side-by-side for ease of price comparison and can very quickly identify the best price. His traders can view and analyze the cost savings prior to trade execution to ensure the highest level of efficiency and savings.
According to NeuGroup Peer Research, a recent survey of treasurers highlighted the urgency placed on process improvement and resource optimization, which is why technology transformation holds its place as one of the top-three projects and priorities for NeuGroup members. Corporate treasury staffs continue to seek tools that improve automation and increase efficiencies, with more than 79% of NeuGroup FX Peer Group members using Bloomberg exclusively as their market data/research source, while 69% of members utilize the FX rate feeds for accounting purposes.
FXGO allows clients to prepare and execute FX trades and option strategies seamlessly using either algorithmic or standard orders from a wide selection of liquidity providers. FX orders can be input directly or uploaded from an order management system or Excel. Traders can compare quotes for best price and execute orders one at a time or as a batch. “I am able to negotiate trades with multiple counterparties and leverage the system to extract comparable data to provide management reporting for more effective decision making. This has been a very effective tool to save on FX trading costs while continuing to further develop bank relationships,” Mr. Majeed says.
Bloomberg’s comprehensive order management and post-trade integration allows clients to establish a variety of STP workflows to give traders the convenience of automated booking of trades directly into their internal systems. FXGO supports straight-through processing for all of Bloomberg’s trading products and provides customizable file formats and delivery mechanisms. “As a company who is a leader in enabling businesses to grow faster and lower operational costs, we appreciate the technology provided to us by Bloomberg,” Mr. Majeed says.
Growing Cash Balance Requires Expansion of Asset Classes
With more complexity comes more worry at Medtronic.
As Managing Director at Medtronic with global investment responsibilities, Todd Thorsen has been working hard to build sophisticated investment strategies with a focus on balance sheet management, retirement plans and best-in-class interest rate risk management.
The rapid growth in Medtronic’s global business means Mr. Thorsen has seen significant growth in scope during his tenure. With annual revenue close to $30bn, he finds himself more involved with strategic projects as he works to balance risk and return objectives with a level of cash that continues to grow rapidly.
With PORT “we are able to perform stress tests on our portfolio based on various historical events, such as the economic crisis, as well as hypothetical market scenarios, such as a change in interest rates.”
Using Bloomberg’s Portfolio & Risk Analytics solution (PORT), Mr. Thorsen can examine the current and historical performance of his investment portfolio, both on an absolute basis and relative to specific benchmarks. He can identify sectors or holdings that have exhibited the best risk and return trade-off and those that have contributed the most to the portfolio’s overall return.
PORT allows users to easily implement their portfolio investment and risk management strategies and leverage Bloomberg’s vast securities database to analyze their portfolio’s current and historical characteristics. PORT helps users visualize a wide array of standard equity or fixed-income fundamental metrics like P/E, yield, duration, and credit quality in order to make quicker, more informed decisions and measure market-related and security-specific risk exposures for their portfolios.
As with many other large multinationals, the level of trapped cash has continued to grow for Medtronic and it is no longer an option to just offset that level of cash with onshore debt. Now it requires new innovative thinking and new market tools to review and manage the growing cash balance. “We have had to expand our asset classes and with that comes more worry about tail risk and other potential market disruptions,” Mr. Thorsen explains.
Mr. Thorsen therefore could no longer just count on diversification; he needed to be able to scrub his investment portfolio for unintended risk and by using PORT, he could better analyze his investment risk based on a review of every asset and the outcome of various what-if scenarios. “Bloomberg has allowed us to stay focused and drill into the specifics of each portfolio,” he says. “We are able to review positions and prepare management reports that give us an early warning for potential disruptions. It has been a tremendous time-saver.”
The PORT functionality allows users to estimate their portfolio’s maximum loss at a given confidence interval and provides insight into expected tail risk using the latest risk modeling techniques. Clients can be prepared for the next big market event by estimating the impact on their portfolio using Bloomberg’s scenario tools.
“We are able to perform stress tests on our portfolio based on various historical events, such as the economic crisis, as well as hypothetical market scenarios, such as a change in interest rates. We needed a risk platform that would allow us to test and evaluate a variety of complex scenarios. Bloomberg does that for us very well,” Mr. Thorsen says.
Finding a CMBS Needle in a Haystack
To help monitor the multitude of loans in its CMBS portfolio, Arbella brings to bear Bloomberg functions like DRSK, PORT, DES, and a host of others.
Quincy, Massachusetts–based Arbella Insurance Company is a regional personal and business insurance provider for Massachusetts, Connecticut, New Hampshire and Rhode Island. The company has more than $800M in revenue and approximately $1.5B in assets.
Senior Investment Analyst Dwayne Parmley uses Bloomberg daily in a variety of ways to do his job. In his position he is responsible for researching new investments, trading bonds, and monitoring existing holdings.
Arbella’s portfolio mainly consists of corporate bonds and commercial mortgage-backed securities (CMBS) along with some asset-backed securities (ABS). For the research, Mr. Parmley often uses the Bloomberg Intelligence function (BI). “It has very detailed industry and company information.”
Also on a daily basis, Mr. Parmley uses FA to see financial information and DRSK to see default risk probabilities. To get a description of a security, he utilizes the DES function, which provides a brief overview of what the company does along with fundamental data on price, the 52-week high and low, market capitalization, earnings per share, P/E Ratio, and dividend yield, among other information. YA is employed for yield analysis and TDH helps determine historical levels of trading activity. Mr. Parmlay also uses Bloomberg Evaluated pricing (BVAL), along with FIRV to measure the “richness or cheapness” of a bond, and COMB to look at the yield and spread along with some recent trades and relative value. Finally, Mr. Parmley uses USSW for current interest-rate swap data and data on US government debt, agencies, and futures.
Because Arbella’s strategy is mostly buy-and-hold, the company doesn’t do a lot of trading, Mr. Parmley notes. Nonetheless, he frequently is in touch with brokers and finds Bloomberg’s instant messaging feature (IB) convenient. “I spend a lot of time communicating with brokers to see what bonds they own,” he says. “I get several thousand emails a day so I don’t even look at them. I also try to limit my phone calls; so I will have several IB chats going at once because it’s more efficient for me.
In terms of monitoring existing holdings, Mr. Parmley uses the PORT function to see the company portfolio and look at its current make-up. “I look at sector weights, company exposure, key rate duration, and the maturity schedule,” he says. Bloomberg Intelligence is also helpful here, Mr. Parmley adds, as it reveals any issues with a company or industry.
“Once we own a bond then the surveillance becomes important because we want to know of any credit issues as soon as possible,” Mr. Parmley says. “We get quarterly earnings for our corporate bonds and monthly data from our securitized bonds. To manually check this information would be difficult and very time consuming.” For these Mr. Parmley uses spreadsheets that pull in the bond data, “which saves a tremendous amount of time. For example, I can look at all of my CMBS holdings on one spreadsheet and quickly determine if any underlying loans are delinquent or if there are any loans on the watch list. This allows me spend more time drilling down on any areas that need more attention.”
The Bloomberg Terminal’s ability to look up data on specific loans was particularly helpful last year when a national retailer went bankrupt. “We probably own thirty different CMBS loans, so it would be really difficult for me to go into every deal and see if any of those two hundred loans [within the CMBS] have the bankrupt retailer as a tenant,” Mr. Parmley says. “Bloomberg is really good at this. I can look at my portfolio in whole and I could see what exposure we had to that tenant; so in less than 15 minutes I could figure out that we had CMBS deals that we own that had exposure” to the bankruptcy. He added that ultimately it was de minimis so wasn’t a concern. “But it’s something that the CFO would ask about” in the weekly meetings Mr. Parmley and his team have with him.
So in this case, “before he could even ask about it I had the information ready for him,” Mr. Parmley says.
PORT<GO> for Checks and Balances
Tableau plans to use Bloomberg to act as another eye to make sure all data are in sync.
Tableau, a pioneer in visual analytics, helps users quickly analyze, envision and share information from a variety of data. The company boasts more than 57,000 customer accounts for office and mobile and more 300,000 customers on Tableau Public, with which they share public data on blogs and websites.
For Ed Barrie, Tableau’s director of treasury, Bloomberg’s PORT function is critical in his treasury’s plans to create a better view of the company’s portfolio and data flows. Mr. Barrie, who has implemented treasury management systems at Microsoft and Itron, says Tableau’s entire system structure is being implemented in three phases, the final phase of which will be incorporating PORT.
Along with acting as a check against Tableau’s custodian bank and its external risk and analytics provider, as well as adding the ability to spot anomalies in the data it collects, Bloomberg PORT will also allow Tableau to gain more control over all its analytics, and the ability to create custom reports as needed.
Currently, Tableau’s custodian bank and analytics and risk provider together gather data on trades and end-of-day holdings on transactions and cash settlements from the company’s investment bank. The custodian sends the data to the analytics firm and from there Tableau runs a month-end reporting package after the analytics firm has “locked down” Tableau’s ledger in its system. This then “supports the journal entries that we upload into our NetSuite ERP system.” All of this is then sent to Tableau’s financial master warehouse.
The next step will have the custodian bank begin transmitting to Tableau’s systems a “daily holdings and valuations in accrued interest” report. Mr. Barrie says this is “similar to what they already send” to the analytics firm. “However, it’s a newer data format and what we want to be able to do is pull that into our data warehouse…and then we can automate some reconciliation between custodian and analytics.” Mr. Barrie says that with this, treasury can look at what the analytic firm’s market value is for each position vs. the custodian’s and then compare the two. For instance, treasury can see whether there is a dollar difference between the two and if so, what percentage is that difference. “Then we can flag any deltas over certain thresholds.”
When this is finalized Bloomberg PORT will enter the final phase. In this configuration, the custodian will start transmitting an end-of-day holdings or position file from its system to PORT, which then will produce several reports around attribution, performance, statistics and metrics in the company’s portfolio. Tableau will then take those reports and transmit them into the company’s financial master data warehouse. This will allow Tableau to take the best reporting from the analytics firm, the custodian and Bloomberg. “Overarching all of that will be Tableau,” Mr. Barrie adds. “Then we can build our own additional analytics as we need on top of that.”
So how does Bloomberg add value to the current system structure?
“It’s really from a valuation perspective and a security master file perspective,” Mr. Barrie says. “It’s about automating that reconciliation.” And even though the analytics firm “already does that, we can do a secondary independent process around it, which our internal and external auditors would like to see.”
Tableau is also checking to make sure that the valuations from the analytics firm and the custodian are in sync. Mr. Barrie says Bloomberg PORT will be able to value the company’s portfolio and all of its holdings. In this way treasury can compare three different pricing sources from Bloomberg, its analytics firm and the custodian bank. “And we can look across all three systems and then triangulate our values and [see if] everything is within tolerance difference…and if there’s anything outside of that, throw an alert and then we can look at that day over day and ask, ‘is this a one-time anomaly or is this particular security or holding always outside of this tolerance and for how many days?’ ”
“What we envisage is getting [Bloomberg’s] total exposure view,” Mr. Barrie says.