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Bridgewater opts for dual model in middle-, back-office revamp

Eileen K. Murray, Bridgewater's co-CEO
Eileen K. Murray

Bridgewater Associates is implementing a double valuation process, using BNY Mellon and Northern Trust, as it nears completion of a five-year project to outsource all middle- and back-office functions.

BNY Mellon provides all of the middle- and back-office services and is responsible for producing Bridgewater’s official books and records, said Eileen K. Murray, Bridgewater’s co-CEO, in an interview.

But by providing Northern Trust with the same information that’s given to BNY Mellon for independent processing, Bridgewater gains a strong measure of confidence in the valuation of its portfolio holdings, Ms. Murray said.

The two companies review and reconcile their valuations with each other, monitored by an internal Bridgewater quality-control team.

“I can look any of our clients in the eye and assure them that their money is safe and their valuations accurate,” Ms. Murray said.

Another advantage of the dual-party model is that Bridgewater’s data is backed up twice in case of systems failures.

Most of the elements of the dual-party model are operational, Ms. Murray said, with just a few more processes to be added by the end of the year.

About 95% of Bridgewater’s clients, which invest a collective $150 billion in the alternative investment firm’s strategies, said in response to an internal survey that they “really like this model, especially the fact that valuations are independently verified by two parties,” Ms. Murray said.

“The growing complexity of middle- and back-office functions and rising technology costs are driving the need for more efficient information delivery and data management processes,” said Samir Pandiri, CEO of asset servicing for BNY Mellon, in a Bridgewater news release.

Ms. Murray said the two banks spent “hundreds of millions of dollars building this platform,” adding that Bridgewater’s information and processes will be kept separate should other money managers opt to use the same dual-party platform.

‘The dual outsourcer model is a differentiator in the industry,” said Michael O’Grady, president of corporate and institutional services at Northern Trust, in the release.

“The increased oversight and quality assurance over hundreds of reconciliations and reports across thousands of attributes provides greater safeguards and increased flexibility,” for Bridgewater and its investors, Mr. O’Grady said.