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BNP Asset Management's Pojarliev discusses a variety of options to address foreign currency exposures. Although there is no single best-practice solution for addressing foreign currency exposures, institutional investors have three main choices, he says.

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August 1, 2013

Retail Wranglers

By Mary Schroeder

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Cambiar uses multiple proprietary software systems to implement the firm's strategies with the various sponsors of the retail products, as well as systems provided by third parties including Fiserv and Vestmark, Natixis, Parametric, Placemark and Advent's MOXY OMS, says Hiles.


Cycling through

All the institutional and retail accounts are managed by the portfolio managers as part of one of Cambiar's seven strategies, which include: large-cap U.S. equities; small- and mid-cap equities; ADRs; international; aggressive value; global; and small-cap international, which is currently in incubation.

Christian Hiles

At Cambiar, the trading process often works like this: If the desk has gotten the word to work an order to a 2 percent position firmwide, Hostetler will work the institutional order and maybe get halfway done to 1 percent. Then the desk will cycle one by one through the retail product sponsors. The trader handling UBS might go first, then Morgan Stanley, etc.

"We try to keep the rotation equitable and fair and completely randomized," said Hiles, who has been with Cambiar for nine years and was hired to trade the retail accounts. He was previously a trader with brokers Tucker Anthony Cleary Gull.

See Chart: Totally Electronic

The degree to which the trading desk gets involved with the retail accounts depends to a large extent on whether the orders emanate from an SMA or UMA. For the SMA accounts, Cambiar trades the account itself through the sponsor's desk via proprietary or third-party software.

For UMA accounts, Cambiar routes the orders to the broker-sponsor. A clerk on the sponsor's trading desk processes the trade and executes it on their end, Hostetler explained. With UMAs, Cambiar's buy and sell decisions are delivered through portals, the sponsor's third-party software or encrypted email.

Some UMAs allow Cambiar to communicate instructions about how the firm would like the order executed, but for others Cambiar only delivers the buy and sell information and asks that the sponsor let the firm know when it is in and out of the market on the trade, says Hostetler. "This process has improved somewhat since the early stages of UMAs a few years ago, where after delivering the [buy and sell instructions] to the sponsor's administrator, most would not report to us when the trade was active," he said.

Throughout the rotation process at Cambiar, the traders are in close communication with each other. "It's cumbersome, but I think we've got it fine-tuned with good communication between our traders, analysts and portfolio managers," said Hostetler.


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