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This article previously appeared on Reinsurance News
Unifying the investment management process on BlackRock’s technology platform, Aladdin promotes the creation of a surface for data to flow, enabling integration and data consistency for clients, according to David Schneid, General Manager of Aladdin Accounting.
The platform combines sophisticated risk analytics with comprehensive portfolio management, trading, operations, compliance, and accounting tools supported by advanced analytics and a common data language; helping Aladdin clients by providing a stable, secure foundation they can openly innovate on—built for the continuous pace of change.
As digitisation continues to expand on a global scale–and grows in importance and influence across the insurance and reinsurance landscape–we spoke with Schneid about the benefits of Aladdin technology and its ongoing evolution.
“What it means to unify your investment process on the Aladdin platform and take it from the front office through to trading, accounting and reporting,” said Schneid, “is really about creating a surface for that data to flow, and really solving for as much of the consistency across the investment experience for clients.
“When you think about what Aladdin technology is at its core, it does all these great things in terms of analytics, trading, risk management, operations, and accounting and performance,” he said. “But certainly, at the end of the day, it really boils down to a data processing pipeline, and that goes back to the core ethos of what the Aladdin platform is and how BlackRock approaches client relationships.”
“I love understanding the things that make clients unique—and what makes them inimitable when compared with their peers. Every client has differentiated elements—a secret sauce—and we want them to have the right integration points into the platform, while leveraging Aladdin technology’s strengths to bring their organisation together,” he continued.
One of Aladdin technology’s core strengths is its ability to maintain a real-time view of clients’ risk positions, and being able to create a single, unified view for the entire portfolio (publics and privates)–something which Schneid explained is difficult to achieve with legacy models.
“What we’ve seen, and what we’ve worked with clients on, is collapsing their investments ecosystem in a material way. A legacy model would be, I have a risk system, I have a trading system, I have a system for derivatives, mortgage loans and so on, and then I have potentially a different set of accounting platforms for each.
“So, you end up with a spaghetti bowl that’s been integrated over time, and more often than not the people that build that integration have long left the firm. At that point, all you have is a company where all they do is manage risk in reactive ways; for insurance, an industry that already has a lot of risk baked into it, that puts you on your backfoot—which is not where you want to be given all of the market volatility, geopolitical risk, and climate risk considerations etc,” said Schneid.
When you pull that all together on the Aladdin platform and collapse the components to create consistency, what it does is it allows the whole firm to speak a common language. And then, that firm can invest in those things where they can really excel and differentiate themselves.
“We’ve seen that now with hundreds of clients: the ability to do that across different life cycles, across different assets. Public, fixed income and equity, private assets, derivatives, more esoteric assets—all on the same platform. So, the PM has that view, the CEO has the view, but also the Chief Accounting Officer and the Controller have the same view. It’s hugely powerful,” he added.
For insurers in particular, leveraging Aladdin technology has ultimately expanded how they run their entire operational model.
“It’s not just for the company that manages all the assets themselves, but those companies that may rely on third-party managers to help manage the asset portion so they can focus on the liability portion,” explained Schneid.
BlackRock was established in 1988 and is now one of the world’s preeminent asset managers. Aladdin technology, which started as a portfolio evaluation tool in the early ‘90s, has also evolved dramatically.
“We’ve invested heavily in expanding our accounting capabilities for clients,” said Schneid. “We’ve been in the accounting space for over 20 years, beginning with supporting Bermuda reinsurance entities, and we’ve invested heavily in changing the way we engage with clients on accounting. That includes building things like a CECL analytics model where you can use our analytics to achieve accounting outputs in a very direct way.”
Of course, utilising advanced technologies to build enhanced tools is an important part of the Aladdin platform’s success, but as explained by Schneid, it’s also about the people.
“We’ve built high-class teams with top talent to wrap around the technology, so you can get the best of both worlds. We’re able to really provide that combination of broad capabilities, making large investments in those capabilities, combined with the right people to help those clients get the most out of them,” he said.
The company has invested heavily in modelling climate risks as part of its commitment to continuously expand its risk models.
“Insurance clients have been able to leverage Aladdin Climate to understand the risk associated with a transition to a low carbon economy. What is that going to mean for their portfolio? What about the exposure to physical risk?
“This is particularly important for insurers given the potential physical risk associated with their liabilities.
“But also, in terms of that data distribution, Aladdin Studio is our data distribution platform and warehousing, using modern capabilities to give clients a platform to use data analytics that can interact with core Aladdin libraries,” said Schneid.
Impressively, the expansion and development of the Aladdin platform has really focused on everything that touches an investment ecosystem which is evolving rapidly—and as the market changes, so too will Aladdin technology.
“We went from low rates to high inflation. Now, with high rates again, it’s putting pressure on portfolio allocations, and technology is going to need to change because portfolios are going to change. And so, there’s a lot of room to run. For us, it is really about how we help solve client problems, and how we anticipate what those problems are so we can get ahead of them. We’re never ‘done’,” concluded Schneid.
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Listen to our take in this conversation between Georgette Anderson, Director, Business Development, and Brett Sadler, Managing Director, Aladdin Client Engagement, where they cover key topics within insurance investment management: M&A activity, a hyper-connected IBOR/ABOR, and a view of the whole portfolio (public + private markets).
Aladdin® is a technology platform used by asset managers and owners including banks, financial institutions, pensions, corporations, insurers, and wealth managers. The Aladdin platform unifies the investment management process, providing a common data language within an organization to enable scale, provide insights, and support business transformation. Through eFront® technology, alternative investment data management is covered to meet the needs of alternative investment professionals worldwide and across all major alternative asset classes. From fundraising, fund administration and reporting to data services and analytics, the platform provides capabilities to support decision making and investment oversight.
Aladdin® and eFront® platforms bring together public and private asset class data to create an industry-recognized whole portfolio solution for investment professionals globally. Find out more at www.blackrock.com/aladdin | request@blackrock.com
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