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Why two heads are
better than one
Eileen Murray, co-CEO of Bridgewater Associates, helped launch the industry’s
first dual-outsourcing model using two custodians. Joe Parsons speaks to Murray
about how the world’s largest hedge fund has utilised this model.
I
n 2016, Bridgewater Associates be-
came the pioneer of the dual middle-
and back-office outsourcing model.
The unique system introduced a new
“double-do” concept, whereby all middle-
and back-office functions were performed
by BNY Mellon, and were coordinated
with Northern Trust as an independent
verifier.
The new model enabled Bridgewater
to concentrate on its core strengths as a
hedge fund manager, while at the same
time gaining greater oversight and assur-
ance over hundreds of trade reconcilia-
tions and reports.
Two years after the model emerged,
Global Custodian spoke to Eileen Murray,
co-CEO of Bridgewater Associates, on
“What we have is an
independent, dual-party
verification model of client
assets, ranging from trade all
the way to custody.”
how she feels this new model has gone,
and how the dual-outsourcing model can
be evolved.
Global Custodian: How have you found the
dual outsourcing model experience? Have
there been any complications?
Eileen Murray: This has been a terrific
experience for us. What we have is an in-
dependent, dual-party verification model
of client assets, ranging from trade all the
way to custody. I came up with this by
looking at what was going on in the world
and seeing three major issues we needed
18
Global Custodian
to address. When I looked at what was
going on in the world in terms of business
continuity and potential disruption in
different parts of the market, I identified
that we needed to have a back-up to cover
those different timelines. Secondly, we
also needed a model that could provide
independent valuations of our invento-
ry. Finally, we deal with a tremendous
amount of data and there were a number
of regulatory changes coming out just be-
fore we adopted this model, so I thought
why don’t we outsource our middle-office
and our fund administration to a single
counterpart and then have that re-veri-
fied by a second counterpart that is not in
the same region.
Our goal was to go after client safety and
security, increase accuracy with regards
to transaction data, and increase resilien-
cy, which gives us a strategic advantage.
All of that is benefiting the clients as an
overall risk and cost reduction scheme.
GC: What have you learnt from using two
custodians for the middle- and back-of-
fice, and what data have they produced?
EM: Having an independent verification
of our client assets is really critical for
us. Northern Trust and BNY Mellon
review and reconcile our positions and
cash throughout the day, and as a result,
our error rates are substantially less than
industry averages. Additionally, the in-
creased resiliency we get from this model
is really important. Having two independ-
ent technology and operation platforms
that are geographically distributed is the
best state-of-the-art resiliency. The stra-
tegic advantage is not just about ensuring
assets are secure, but rather it’s about
The Hedge Fund Annual 2018
Eileen Murray,
co-CEO, Bridgewater Associates
being supported by two major banks
that are continuously improving their
platforms, are continuously navigating
an ever-evolving regulatory environment
and are important global financial insti-
tutions, because as such they are subject
to controls and oversight, which provides
significant comfort.
GC: Have there been any complications?
EM: There have been some processes
that moved quicker than we anticipated
and some that took longer than initially
thought. However, the partnership has
been great; both banks and the clients
are happy. By and large, I feel pretty good
about it, and feel proud to be part of the