Stone Harbor Secures its Foundation for Growth

When employee-owned institutional fixed income asset manager Stone Harbor Investment Partners was spun off from Legg Mason in March 2006 it had just four months to build its own IT infrastructure. “We had to get ourselves up on a shoestring and make the transition from Legg Mason to our own facilities, our own platform, and make that as transparent to the clients as possible,” recalls James Dooley, Stone Harbor’s CFO.

The firm started out with $8.5 billion in assets and approximately 50 people. Now it is up to around $18 billion in assets – including awarded but not yet funded mandates – and about 60 employees. “We’ve increased the number on the investment side, while we’ve hired one person on the support side,” says Dooley. “And part of that is because the technology we’ve put in place has allowed us to scale our business without a commensurate growth in the support infrastructure.”

Stone Harbor’s policy has been to standardize its platform on Microsoft technology. Primarily it was for reasons of simplicity and support, since having a completely integrated framework was better than implementing best-of-breed tools in every function and trying to integrate the disparate components, says Dooley.

At the heart of the infrastructure is a consolidated data warehouse, which also serves as an operational store. “So it’s not just for reporting,” says Dooley. “We process transactions against it as well.” And because all the firm’s systems are running off the same data, “we don’t run into the data inconsistencies that a lot of shops end up with,” he adds.

The data warehouse is built on Microsoft SQL Server Enterprise Edition 2005, which the firm also uses to run its portfolio accounting system, the Thomson PORTIA platform. “We used to run PORTIA on Sybase at Citigroup, but we moved it onto SQL Server 2005 here and have found it performed significantly better,” notes Dooley, who adds that they plan to migrate it onto SQL Server 2008.

In addition, Stone Harbor has feeds from various data service providers, such as Bloomberg, into its data warehouse. “For the ETL tool, where we bring in the data, transform it, and put it into a standardized structure, we use SQL Server Integration Services 2005,” says Dooley. “We created a framework with that, so everything goes through the same process, and all our exception handling is managed through the SSIS packages.”

The firm then uses the Microsoft Smart Client Software Factory Architecture, with which it has built a number of proprietary applications. One is its Performance & Attribution Manager, which can compute daily securities and portfolio level performance, daily portfolio level attribution, and GIPS-compliant composites.

Another is called Best of Breed, which automatically compares the Bloomberg and PORTIA securities master data on a daily basis, reviews any differences and automatically loads the accepted changes, to ensure the data held in PORTIA for accounting purposes is accurate, notes Dooley. Meanwhile, the firm’s Securities Pricing System (SPS) automatically compares price variances and identifies potential pricing issues, such as where large variances occur, or where there are stale prices or un-priced securities.

Stone Harbor has built its own Client and Relationship Manager system as well. “It keeps track of all the contact and reference data related to clients and the portfolios we manage for them, any new business opportunities we may have with a client, and any communications with them,” Dooley explains. And by leveraging SQL Server Reporting Services 2005 and SoftArtisans OfficeWriter v3.5 for the reporting templates Stone Harbor is able to provide its clients with highly customized reports, he adds.

In addition, the firm uses Windows SharePoint Services document management system as a single repository for all its documents, and is in the process of implementing the Microsoft Dynamics (formerly Microsoft Great Plains) accounting software, which will be live by the fourth quarter. Aside from the strength of its functionality, “part of the reason is we want to take advantage of linking all our invoices on SharePoint back to the accounting system,” says Dooley.

As for future steps, the main focus is on building more applications and bringing more data into the warehouse. “We rely heavily on the patterns and reusable components to make sure we standardize across the entire framework,” says Mohamad Hijazi, Stone Harbor’s CTO. “And one of the challenges as the business grows is that we’re trying to streamline the capacity as we’re consuming more data, and the performance throughput of the system itself. So there’s a lot of optimization going on behind the scenes, a lot of automated archiving procedures we need to design and implement. And since this is an integrated framework, and all the applications somewhat rely on the consolidated data underlying it, we’re also integrating the workflows across business functions.”

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