LUMINA ASSET MANAGEMENT

www.luminaamericas.com

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What is it?

What is for?

Who Should it

be used?

Why use it?

LUMINA ASSET MANAGEMENT

LAM is the Lumina’s Asset Management module responsible for keeping investment Portfolios in line with com-

pliance, rules and investment policy restrictions. LAM executes portfolio rebalances, generating periodic ad-

justments to implement policy statements on performance returns, geographical distribution, liquidity targets,

asset rankings and volatility, among others.

• Automatic portfolio building based on investment policies

• Proposal and execution of rebalance adjustments to reflect investment policies

• Automatic rebalancing of orders generation

• Centralized control of investment policies for multiple portfolios from clients - private banking or funds -

based on their portfolio models

• Execute balanced operational event algorithms (strategies) on portfolios (e.g. cash in / out)

• Generate and administrate working sessions with rebalance proposals

• Asset Managers

• Private Banking Managers

• Discretionary Portfolio Managers

• Mutual & Pension Fund Managers

• Automatic & massive adjustment of portfolios based on investment policy statements

• Mutual & pension fund compliance

• Customized rebalance algorithms (strategies)

• Automatic pre-order generation

• Built-in integration with LOMS (Lumina Order Management System)

• Multiple OMS integration based on FIX protocol and Webservices

• Operational event rebalances algorithms (strategies) (cash in / out)

• Massive rebalance for generic portfolio models or specific ones

• Ability to incorporate portfolios from other corporate systems

• Portfolio Visibility, Security and Audit

• Regulatory compliance

• Working session flexibility, with proposed deltas and portfolio revaluation

• Impact visualization (short positions, liquidity excess, etc.)

• Ability to integrate external instruments and analytics to the rebalance process (external portfolios)

• Multi-Product & Multi-Currency support: quoted instruments (Fixed Income, Equity, ETF, Funds) and OTC ins-

truments (FX)

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INTRODUCTION

LAM – Portfolio Rebalance- Introduction

The portfolio rebalance process in LAM starts working with an input (investment portfolio), a set of portfolio investment rules, a rebalan-

ce dashboard to visualize in real time the potential new portfolio considering the rebalance actions and an execution strategy for those

rebalance orders.

Portfolio RulesThe Portfolio Rules determine the portfolio investment policy. They are created for a given Portfolio Model, which is assigned to one or

several Contracts.

Rules can be monitored, generating a set of portfolios rebalances. Rules are defined with different segmentations and analytics, incorpo-

rating business logic and analytic ranges that will raise alarms for any excess incurred. Thus, rules alert about excesses or drifts in relation

to the portfolio investment policies.

Examples of Portfolio rules include:

• Portfolio Fixed Income position (segment) between 20% and 40%

• No investment in emerging market equities

• Total portfolio volatility of less than 5%

Conceptually, all rules include:

• The Universe inside the portfolio. For instance: government debt instruments

• The Analytics to be observed inside the given universe. For Instance: the duration of government fixed income instruments

• The Strategic and Tactical range (delta). The ranges are defined in all cases with a max and min, considering that both can be the same

(e.g. for excluded cases both min and max are zero). Ranges define strategic values, together with a delta that is used as the allowed

deviation, establishing tactical ranges that are also accepted in the rebalancing process.

E.g. between 1.5 years & 3.4 years, with a margin (delta) of +/- 6 month.

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INTRODUCTION

Rule Types • Instrument-Based: Applicable for portfolios where each financial instrument is defined to have an exact percentage of allocation.

Given the definition of this type of portfolio, they are usually not combined with other type of rules.

• Multiple Rules: This sort of portfolio allows the definition of multiple rules that, when combined, define the global investment strategy.

This type of portfolio can include the following rules:

• Concentration: It defines a numerator and denominator universe. Thus, the quotient between the numerator and the denomi-

nator (mtm) is validated to be in a given range.

• Value-Based: It requires that a given analytic (usually a weighted average) is between a range of predefined values.

• Matrix: It requires that a subset of the portfolio, grouped by a given attribute (e.g.: issuer), is between a given range of predefined

percentages of the MtM. Validations is performed for each element of the subset (e.g.: for all issuers).

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INTRODUCTION

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INTRODUCTION

Tactical and Strategic ValuesThe strategic value for a given rule represents the ideal value or value range to hold in the portfolio. The tactical value is the one that, consi-

dering current market condition, liquidity or any other temporal reason, is acceptable as the deviation from the strategic one. Tactical value

or range is obtained as a plus or minus delta from the strategic value.

E.g. strategic bond concentration of between 5% and 15% in the portfolio mtm, whereas the tactical level could be between 5% and 25%.

Instruments and Attributes DefinitionLAM makes use of all available instruments and their attributes based on the existing configuration. Therefore, every Lumina supported

product statically defines a set of attributes that are used for rules calculations.

Should new or external attributes be needed, LAM uses a Custom Attribute functionality to add it to the dictionary.

Example:

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INTRODUCTION: Rule Examples

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INTRODUCTION: Rule examples

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INTRODUCTION

Portfolio Rebalance Execution Strategies (Algorithms)The execution strategies are the mechanisms to carry out portfolio rebalances, starting with rule excesses or specific use cases like

portfolio cash in/out. Depending on the complexity, these strategies could be manual non-automatic executions.

Portfolio DashboardThe portfolio dashboard displays the simulation where the portfolio manager applies all changes suggested by the rebalance strategy

(deltas) to the current asset allocation, such as incorporating or removing instruments. This dashboard visualizes the result of the po-

tential rebalance in terms of the existing portfolio rules.

From this dashboard, as a result of manual asset buy and sell and the rebalance strategy proposal, a set of buy and sell orders are sent

to the Order Management System (OMS). The OMS is responsible for the routing and execution of orders, which is the final output of

the rebalance process.

All orders, revised and approved by the portfolio manager, are then sent to the OMS, and the new portfolio and associated order exe-

cution (OMS’ feedback) is updated by the dashboard to proceed with a new rules validation process.

Rebalance Strategies/AlgorithmsThe rebalance algorithms are the execution strategies which generate all the instructions to put the client’s portfolios on the same

investment levels than the portfolio model. New algorithms or strategies can be easily incorporated to determine the business logic for

delta generation and instructions as well as order execution.

Algo WRS – Weighted Rebalance Strategy

The WRS works on top of all excesses informed by rules that make references to specific instruments, generating deltas for buying and sell-

ing concrete instruments. For the rest of the rules, only the alert is shown, and no instructions are generated (e.g. excess in the % of MTM

for Fixed Income but no concrete action on one or several instruments).

Algo FBR – Force Buy Rebalance

For all those cases where the maximum has not been reached, the rebalance process invests all available portfolio liquid cash to reach that

maximum but considering the existing asset weights.

Algo FBUR – Force Buy Unbalanced

Like FBR, but not necessarily respecting the existing asset weights. That is, it tries to use all available liquid money to buy all qualifying as-

sets, approximating total concentration to the maximum established.

Algo ILS – Instrument Limit Strategy

Used mainly for portfolio allocation as defined by efficient portfolio management (risk-return) where a specific weight per asset is defined.

The ILS algorithm works to reach the maximum weight percentage per asset.

Algo CAC - Capital Change

The CAC algorithm represents the basic behavior of investing or withdrawing money from the portfolio. Money is distributed proportion-

ally (buying or selling) to maintain the current portfolio composition.

This algorithm calculates total portfolio MTM as well as each instrument MTM in the portfolio, and based on this asset MTM portfolio per-

centage, determines the cash amount to buy or sell for every asset, while maintaining the existing asset weight.

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DETAILS

Asset Management Position MonitorThis monitor shows the current asset position of every contract. That includes:

• Asset position built from settled positions, deals still not settled and non-executed orders. That position is the one used in Lumina to

validate portfolio regulatory compliance.

• All external position information from other source systems.

Contracts in Lumina are configured to determine the associated Investment Service: regular Advisory (regulatory) or Asset Management

(LAM) which includes all functionality hereby described.

Lumina Asset Management MonitorThis monitor allows the user to review the current status of each portfolio in the system and initiate the rebalance process.

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From this monitor, the user can:

• Create, Open, Save, Clone working Sessions (*) with rebalance proposals (deltas)

• Valuate/Reevaluate the portfolio, considering the original position plus all generated deltas

• Choose the Rebalance Strategy (accordingly to the rule)

• Rebalance

• Send deltas as instructions (Pre-Orders) to the OMS

• Visualize delta details for each contract

• Execute global portfolio or specific contract rebalance process

DETAILS

The sessions can be configured to work with either tactical or strategic ranges:

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DETAILS

(*) by cloning rebalance sessions it is possible to support the following scenarios:

• Yesterday, the asset manager had been working with a given position and delta and -at the end of the day- instructions were sent to

the OMS. Today, the manager wants to pick up the new updated position and reuse previous deltas to start working again.

• Clone session to retrieve deltas.

• Two asset managers desire to work on top of the same original position snapshot to see who achieved the best rebalance result.

• Copy the session to get the original position before any rebalance

• An existing session has already rebalanced rules, but it is desired to proceed with some changes without losing current session deltas.

• Clone session reusing position and deltas and continue working from there.

LAM monitor visualizes an upper grid with different layouts in terms of the type of rule being shown: Instrument-based or Multiple rules.

Instrument-Based

Multiple Rules

The Rebalance ProcessThe goal of the rebalance process is to generate the deltas (a change in the asset position) through the different mentioned algorithms or

manually, to accomplish the portfolio policy statements accordingly to its portfolio model.

As per the definition, only Instrument-based and Concentration Rules work with algorithms for automatic delta generation. However, all

rules can be manually adjusted at client or instrument level. To proceed with a manual adjustment, LAM provides ‘wizards’ for rules that help

to adjust or rebalance the portfolio. This functionality is reached by pressing the ‘Rebalance’ button. Once all deltas are defined, automati-

cally by algorithms or manually entered, the instructions (pre-orders) are generated to be sent to the OMS from the LAM Asset Launcher.

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DETAILS

Instrument Based RebalanceFrom this screen, it is possible to modify, change direction and reevaluate the proposal of deltas generated by the strategy.

Matrix RebalanceIn the upper section the screen shows all Matrix rules with excesses, and in the bottom section, the position in all selected contracts (named

‘global portfolio’). Here, it is possible to add new instruments to the portfolio, as well as manually modify all calculated delta.

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DETAILS

Concentration RebalanceIn the upper section the screen shows all Concentration rules with excesses, and in the bottom section, the position in all selected contracts

(named global portfolio). Here, it is possible to add new instruments to the portfolio, as well as manually modify all calculated delta.

Analytic Value Based RebalanceIn the upper section the screen shows all rules based on analytic value with excesses, and in the bottom section, the position in all selected

contracts (named global portfolio). Here, it is possible to add new instruments to the portfolio, as well as manually modify all calculated

delta.

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DETAILS

LAM Asset Launcher This monitor shows all the instructions generated from dashboard deltas. The filter allows selection of all generated instructions for a port-

folio model or specific contract and visualizes the order status for those already sent to the OMS.

The upper section of the screen reports the instructions generated by the rebalance process.

The bottom screen section allows:

• Sending of individual orders to different OMS

• Sending/Canceling massive orders

• Visualizing the order status (pending, sent, executed, partially executed, cancelled) in line with OMS feedback

• Editing non-sent instructions (single or multiple) and modifying prices:

Suggest and Generate global orders from instructions

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DETAILS

LAM – Instrument and Custom Attributes ModelLAM allows for the definition of instruments and their associated attributes.

• Native integration with Lumina Suite and its instrument universe, but also allows to incorporate external instruments and attributes

• Incorporates translation functions between source system and LAM (e.g. normalization of codes for agency rating)

• Support for daily historical record of values

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OUR COMPANY

Lumina Americas is a regional consulting and technology service company based in Latin America with offices in Argentina, Mexico and a representation in Spain.With more than 14 years of experience developing solutions for the Financial Services

Industry in Latin America, we develop mission critical software solutions to help our clients

build and support their high-performance businesses.

Lumina was formed as a spin-off of regional application development team of JPMorgan

Chase Bank (April 2001)

More than 100 professionals with extensive technical and financial experience

Strong team-work and collaboration culture with more than 10 years working together

Owned and existing solutions for serving the financial market

Software Components and Frameworks

Advance CMM practices

Combination of resources for the whole life-cycle of software projects

Top 40 Argentinean Companies in quality of labor environment

“Proven experience developing, implementing and supporting

mission critical financial systems”

Application Development – Customized Projects

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OFICINASBuenos Aires:

Av. Pueyrredón 2446, 7ºpiso

C1119ACU - Buenos Aires, Argentina

Tel:. +54 (11) 4131-8500

Fax: +54 (11) 4131-8539

México:

Sierra Candela 111, of 412 (11000)

Col Lomas de Chapultepec, CDMX.

Tel: +52 (55) 5985-0559/7453

e-mail: info@luminaamericas.com

Representación Comercial en España

Tel.: +34 618191694

e-mail: info@luminaamericas.com

Visit our website: http://www.luminaamericas.com

Sales, Implementation and Integration

System Integrations

Technology Consulting

CLIENTES

• JPMorgan Chase

• Credit Suisse

• HSBC

• UBS

• Deutsche Bank

• Banco Voii

• Intercam Casa de Bolsa

• Barclays

• Actinver

• Grupo Financiero Intercam

• Grupo Financiero Ixe-

Banorte

• BTG Pactual

• Akaan Casa de Bolsa

• Grupo Financiero Multiva

• Grupo Financiero BanRegio

• Altor Casa de Bolsa

• Kuspit Casa de Bolsa

• Banco Base

• BHD León

• Bursamétrica

• Sura