SunGard Advisor Technologies Unified Overlay Management Program With Outsourced Overlay Management.

SunGard Advisor Technologies

Unified Overlay Management ProgramWith Outsourced Overlay Management

Unified Overlay Management

• Introduction

• Why Overlay Management

• Manager Due Diligence Process

• SunGard Overlay Solution

• Program Benefits

Introduction

At the Forefront of the Managed Account Industry

Unified Overlay accounts are truly the next generation of asset management.

As institutions have expanded their businesses to include fee-based investment services, traditional Separately Managed Accounts are

evolving to what we call Overlay managed accounts – the integration of multiple money managers into a single account.

The SunGard Overlay Solution

• About SunGard Advisor Technologies (SAT)

– Wholly owned subsidiary of SunGard Data Systems

since June 2003 (London Pacific Advisors)

– Original company established in 1983

– Asset consulting services since 1990

– Provider of managed account programs to banks,

RIAs, and broker/dealers

SunGard provides you with access to comprehensive fee-

based investment solutions

Why Overlay Management?

The Demand for Overlay

• Increased industry pressure to deliver best-of-breed managers

• Clients demand more customized and tax-efficient investment

solutions

• Increased focus on straight-through processing and integration

with current trust accounting systems and custodial services

• Overall requirement to keep pace with competitors

• Added focus on fee compression

Traditional Separate Account Management

• Each Separate Account Manager makes investment decisions solely on the assigned investment amount• There is no trading or tax coordination between managers• Access to managers is limited by account minimums • Tax efficiency is limited to the sub- account level • Rebalancing, contributions, and withdrawals are challenging to implement operationally • Platform costs are higher due to more expensive infrastructure needed to support platform

Account A Account C

Client

Advisor

Manager A Manager B Manager C

Account B

Sleeve-Based Overlay Management

• Benefits

– Access to best-of-breed managers– Ability to personalize portfolios– Ability to police tax, trading and

concentration issues

• Drawbacks

– Minimum size requirements– Infrastructure costs – Limitations on degree of portfolio

management Unintended concentrations - risk Unnecessary trading costs Inefficient tax management

Account A Account C

Manager A Manager B Manager C

Account B

Overlay Manager

Client

Advisor

Sleeve-Based Overlay Unified Overlayvs.

Unified Overlay Account

Client

Advisor

Model Portfolio A

Model Portfolio B

Model Portfolio C

Overlay Manager

Account A Account C

Manager A Manager B Manager C

Account B

Overlay Manager

Client

Advisor

Unified Overlay Managed Accounts

• Overlay Manager is responsible for constructing a single portfolio based on the models provided by each of the managers• One set of new account paperwork for one account• Portfolio decisions are customized for each investor • Consideration towards taxes is made prior to executing trades• Overlay Manager controls active risk to the composite target • Rebalancing, contributions, and withdrawals are more efficiently implemented by the Overlay Manager• Lower investment minimums • Lower operational and implementation costs

Unified Overlay Account

Client

Advisor

Model Portfolio A

Model Portfolio B

Model Portfolio C

Overlay Manager

The Role of the Overlay Manager

• Customize portfolio decisions for each investor

• Optimize portfolio performance

• Manage security restrictions and social constraints

• Coordinate tax lot management– Evaluate the trade off of tax cost/benefit versus changes in the portfolio’s risk profile, compared to the target

• Implement account-specific decisions– Coordinated trading – Active tax management– Portfolio transitions– Cash and asset flows, rebalancing– Risk control

SAT’s Due Diligence Process

Manager Due Diligence

• SAT performs institutional-quality research on the managers• SAT’s 16-member Investment Research Group has an average of eight

years of experience • SAT has successfully used a sophisticated four-step screening process for

more than 10 years to obtain and analyze vital information, including specific data which managers are reluctant to disclose

• SAT understands that managers may not be what they seem• Managers that pass SAT’s due diligence process are invited to

participate in the program • SAT contracts with the managers and negotiates fees

Over 50% of our senior professionals have advanced degrees and professional certifications, including CFA® and CIMA

SAT has developed one of the most comprehensive due diligence processes in the industry

Due Diligence Process

Identify Manager Universes

Comprehensive Analysis

Due Diligence Committee

Managers on Approved List

• Multiple databases to identify quality managers

• Screening with 14 measurement tools

• 38-page questionnaire with more than 400 data points

• Meets weekly to review new and updated information

• Approves all additions and deletions to Approved List

• Exception Reporting, performance and portfolio analytics, and quantitative Research

Integrated Team Approach

Qualitative Analysis Qualitative Analysis TeamTeam

(8)(8)

Team Functions:Team Functions:

Qualitative reviews of all products

Site Visits

Research updates, memos on organizational changes, staff,

strategy, other issues

Preparation of MF, ETF, MSP, & No DD profiles

Asset Allocation oversight and reviews

Institutional Services Institutional Services TeamTeam

(2)(2)

Quantitative Analysis Quantitative Analysis TeamTeam

(6)(6)

Risk Management and Risk Management and Institutional Research Institutional Research

Team (3)Team (3)

.

Investment Research Group

Team Functions:Team Functions:

SAM Contracts

Fee negotiations

Custodian Contracts

Client approved lists

Operational setup

Asset Class review calls with clients

Quarterly load coordination

Team Functions:Team Functions:

Preliminary product screening

Quantitative reviews of all products

Research updates, memos of performance, holdings/style, or

risk related issues

Data entry, collection

Preparation of SAM profiles

Preparation of Quarterly Reviews

Team Functions:Team Functions:

Ongoing monitoring of all products

Monthly performance update and asset reports

Quarterly search of news services

Maintain watch list

Audit, proof, edit & QC research work

Institutional Research for major accounts

SunGard Unified Overlay Solution

Turnkey Outsourced Solution

• Designed for firms that are interested in a turnkey unified overlay management solution

– Cutting-edge program that will put your firm at the forefront of the industry

– Provides access to third-party manager models as a method of extending your current investment management capabilities

– Quick program start-up and implementation

– Seamless integration with your current operational activities

Available Overlay Portfolios

Aggressive EquityMaximum

AppreciationLong Term Growth Balanced

Portfolio ObjectivesImplement a single portfoliosolution using a full array of assetclasses

Core Completion ObjectivesAdd value to a client’s existingportfolio with larger capitalizationequity asset classes

Satellite Completion ObjectivesEnhance a client’s existing core portfolio with smaller capitalization equity asset classes

Sample Objectives

Portfolio Objective - Maximum Appreciation

25%

25%8%10%

2%15%15%

Domestic Equity Large Cap Domestic Equity Large CapDomestic Equity Mid Cap Growth Domestic Equity Mid Cap ValueDomestic Equity Small Cap Blend International EquityCash Equivalents

Satellite Completion Objective - Maximum Appreciation

18%

20%

30%

30%2%

Domestic Equity Mid Cap Growth Domestic Equity Mid Cap ValueDomestic Equity Small Cap Blend International EquityCash Equivalents

New Business Development

We help you market the Overlay program with professional, quality presentation and informational tools

• Presentations

• Brochures

• Inserts

• Investment Profiles

– Portfolio Objective

– Money Manager

• Profiling Questionnaire

• Training

How We Work Together

Financial Institution

• Manage customer relationships

• Capture risk profiling information

• Select portfolio objective

• Open account

• Provide performance reports

SunGard

• Conduct manager due diligence

• Negotiate manager fees

• Determine asset allocation

• Manager selection

• Portfolio management and trade execution

• Portfolio rebalancing

• Program liaison and operational support

• Marketing and presentation tools

Benefits of SunGard’s Unified Overlay Management Program

Important Distinctions

• Manage risk with greater diversification at lower investment amounts

• Control what is owned by applying personal restrictions

• Lower cost of entry by consolidating investments into one account

• Gain access to highly-specialized investment managers

• Easy way to add value to current and new customer relationships

• Simplified business processes - multiple client investment products into one account

Customers

Advisors

Financial Institutions

• Free up more resources for building assets by outsourcing the overlay management function

• Access to competitive advantage needed to compete in this ever-changing environment

© 2004 SunGard. All rights reserved.