All Insight

“Partfield is investing in the big ideas. Our forward-thinking insights are shaping the future of finance.”



Cashflow driven investment (CDI)

A customized CDI approach aims to integrate all sources of liquidity and cashflows to help you trade off multiple needs more efficiently. It can help you:

Avoid forced-selling risk

Avoid a cash drap

Maintain flexibility

Integrated solutions

You can access each of our capabilities separately, but many of our clients are demanding more integrated solutions, allowing them to:

Address more factors that influence the journey to their ultimate goal

Utilize the same asset to achieve multiple purpose

Manage the trade-offs between competing needs more effectively

Engaging on the issues that matter

Insight proactively engages on industry and regulatory issues that have implications for our clients and the wider market. These include the transition from LIBOR, central clearing for European pension schemes, and RPI reform.

Insight is playing an active role in the interest-rate benchmark reform process, which will have implications for financial markets worldwide.

Insight is proactively engaging on key issues on behalf of pension schemes across Europe, responsible for the current and future income of millions of European retirees.

Insight drove the national conversation on proposed reforms to the UK's Retail Price Index (RPI) —which could have negative implications for millions of retirees.

Responsible Investing

Our Commitment to Responsible Investing Partfield Investors is focused on delivering market-leading, risk-adjusted long-term investment results to our clients. We believe that integrating Environmental, Social, and Governance (ESG) factors into our investment decision-making and ownership practices are fundamental to achieving that goal. Our investment professionals are finely attuned to the disruptive risks and opportunities an ESG perspective presents – and they seek to be at the forefront of anticipating and adapting to those risks. We measure our success based on the outcomes we deliver to clients and we understand that for many clients, the actual holdings of their portfolio are an important consideration in combination with their investment results.

ESG Oversight and Implementation In keeping with our belief that our investment teams should structure their processes in ways that best deliver required client outcomes, we do not apply top-down rules or an exclusionary approach to ESG integration. Rather, each team defines the ESG considerations they believe are material to the long-term, sustainable growth of the companies in which they invest. Within the overall corporate framework and guidelines that have been established by the firm, we believe strongly that commitments and accountability for ESG considerations must rest within the hands of Portfolio Managers and their teams. Rather than pursue a one-size-fits-all approach, each team is responsible for articulating their specific objectives as part of their Investment Policy Statement. This means that the evaluation of our implementation of ESG criteria is carried out at the strategy level and we are extremely comfortable in having each team stand on its own merits. Partfield’s investment teams manage portfolios that reflect different ESG requirements.

We also have strategies that have a unilateral focus on sustainability. On a corporate level, we support the investment teams to ensure that ESG considerations are embedded in their work. This support includes centralised functions, such as data management, research, investment platforms, and risk management tools:

  • Internal Research Platform: Investment teams share relevant ESG research produced in-house by our analysts across a centralised research platform.
  • Governance & Responsible Investment Team: A specialised group focused on ESG analysis, company engagement, and voting that serves as a resource for all our investment teams and supports ESG integration throughout the organisation.
  • ESG Risk Reporting: ESG data is incorporated into our risk reporting tools, covering issues such as exposure to companies with low ESG ratings, controversies, weak corporate governance, and climate risk.
  • ESG Research, Data, and Ratings: We subscribe to a broad range of external ESG information providers and make this information available directly to the investment teams. Our investment teams define and regularly review their ESG commitments. Investment teams are held accountable by our centralised risk management and performance oversight processes.
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KEY INSIGHT

In 2020, we formally integrated quantitative analysis of climate risks within our strategic credit portfolios, alongside our new ESG ratings.



How do you integrate responsible investment into your investment process?

ESG continues to be integrated into everything we do. Our analysts look at all material risk factors, including ESG issues where relevant. We make sure our credit analysts have clear incentives to maintain their focus on ESG; they understand that integration of ESG factors into their research gives them a better understanding of the long- term risks which could materially impact the default risk of a company,

while also helping them select the bonds that may perform better in the medium to long term.This is reflected in the performance appraisal process. As part of our process, for companies where information provided by external providers is lacking, we send out questionnaires that include questions on ESG risks. Our impact bond framework is integrated into daily morning credit discussions around new issues, and we look

to see how it meets our internal ratings framework and whether there are incremental impact benefitsIn 2020, we amended one of our key tools, the 'landmine checklist', that aims to highlight key risks for all our credit analysts and portfolio managers, to include climate risk as a discrete risk alongside ESG and other credit-material factors



Insight's landmine checklist of material default risk for credit issuers

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Assuming no access to capital markets in the next 24 months, what is the impact on the issuer's liquidity?

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To what extent is the issuer's industry subject to regulation and changes in regulation?

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Is the issuer properly managing environmental, social and governance risks?

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What is the issuer's exposure to transitional or physical climate risk?

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Is the business likely to be subject to an approach from or a bid by private equity?

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Does the management have an appetite for debt financed M&A? Is the company’s share price underperforming?



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KEY INSIGHT

Our proprietary ESG data model and questionnaires enable full integration of ESG risk analysis within our high yield credit process, despite ongoing significant gaps in third-party ESG data in the broader high yield debt market.



How do you integrate responsible investment into your investment process?

For many years we have emphasized to our clients that ESG risks can be more significant in high yield markets than for investment grade debt. Given their capital structures, certain high yield issuers have a smaller cushion to cope with risks — including ESG — that may cause a sudden, unexpected deterioration in credit quality. Further, some sectors with more material ESG risks, such as energy, tend to account for a large proportion of the high yield debt market.

As a result, taking ESG risks into account has long been an essential part of our high yield debt analysis, with governance typically being the most important issue. We consider the materiality of ESG risks, any mitigants in place, and the direction of travel, before determining whether those risks are reflected in the trading price.Despite this heightened potential impact from ESG factors, as credit risk increases, third-party ESG data coverage actually decreases. In 2020, we noted a clear increase in attention paid to ESG factors in high yield debt,

and these risks have become part of the day-to-day dialogue across the market. We welcome the increased attention and transparency around these risks: high yield debt issuers are often private and thus not covered by ESG ratings providers, and even for those that are covered, the quality and quantity of data available is often poorer than that for investment grade. We use a proprietary ESG questionnaire to help fill information gaps, and we believe additional transparency will serve to support accurate research and analysis of issuers.

What are good examples of engagements in 2020 in light of your ESG analysis

Our investment decisions across our high yield portfolios are based on close engagement with management teams to understand ESG risks, and encourage better management of those risks where appropriate. Governance issues are raised with high yield debt issuers a: a matter of course.In 2020, an energy company with which we have a long-standing relationship completed our proprietary ESG survey for the first time.On engaging with the company they highlighted the increased use of gas rather than diesel in their machinery, reducing emissions, and

outlined how the move to digital working had resulted in a smaller impact from the COVID-19 pandemic than would otherwise have been the case. We were positive about this engagement and the increased transparency from the company; we also deemed it suitable for some portfolios with sustainability targets. Separately, we engaged with a European car parts maker after our proprietary ESG rating was downgraded to 5 overall (the worst possible rating),driven by a fall in its social rating to 5. The risks identified were product quality and safety,

with an issue regarding product reliability; supply chain management, where there was limited disclosure on the extent to which suppliers were certified; and labor management, with concerns around processes for restructuring and job losses. The company responded to our questions with additional information, and following a formal review by Insight’s Responsible Investment Ratings Review Group, the social rating was adjusted to 4 based on the new information provided during the engagement.

Our Commitment to Diversity, Equality & Inclusion

Our Diversity & Inclusion Committee and Regional Councils serve to identify aspects of diversity and inclusion in the regions in which we operate. Our Employee Resources Groups offer insight to build an inclusive workplace where employees can be their authentic selves. Partfield has made strategic advancements in our policies, recruitment efforts, and employee professional development. We will continue to focus on opportunities to improve amongst other areas and are working diligently to close the gender pay gap and achieve gender balance within our organisation.

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We believe that our differences are a source of strength for the firm. The breadth of our associates’ perspectives helps us deliver compelling solutions for clients; better reflect the markets we serve; and create a workplace where all feel welcomed, valued, and embraced.

We ensure that we maintain diverse candidate slates—whether recruiting internally or externally. Outreach to high school and college students exposes them to careers at T. Rowe Price and the financial services industry overall. And through performance management, we hold leaders and managers accountable for creating a diverse and inclusive environment for their teams.

AN ENVIRONMENT THAT WELCOMES ALL

Our Diversity & Inclusion (D&l) strategy focuses on three principles:

  • Recruit high-performing, diverse talent
  • Leverage our strong and collaborative culture to promote healthy discussion and idea exchange
  • Achieve both our D&l and overall business goals through active leadership and clear accountability

Serving diverse clients—and achieving diversified growth

Our distribution model is global, diversified, delivering growth, and well positioned to respond to a range of trends our clients and industry face.

We deliver our investments and related services to individuals, financial intermediaries, consultants, institutions, and plan sponsors. But doing this well means bringing the right solutions to our clients at the right time. It also demands that our strategies be available in the channels and vehicles that make the most sense for our clients, wherever they are in the world. Our scale enables us to build and deliver the capabilities required to support a complex, global business.

In 2019, we combined our client-facing distribution businesses into a single organization. This positions us to better optimize the way we deliver products and services to all our clients around the world. It also enables us to manage our brand as a single, strategic asset delivering more consistency and impact. Finally, it helps us galvanize our organization around the single largest need for our clients and, therefore, the largest opportunity for our firm—retirement.

1.4%

Organic AUM Growth

#1

Active target date provider in the U.S.

7%

AUM domiciled outside the U.S.

50%

of net flows generated from EMEA and APAC

>20%

improvement in brabd ranking accross EMEA and APAC

Transforming the Client Experience

Three emerging technologies. Four ways they’re transforming the client experience. Over the past several years, Partfield has significantly increased its technology spend. The company is on a mission to accelerate innovation using technologies like robotics, machine learning, and blockchain, as well as to build up robust expertise in deploying these technologies across the firm. Our digitization strategy embraces everything from upgrading our existing operating model to building entirely new platforms.

The question is, are these investments paying off in practical applications? And how do clients benefit from these investments? Each of these three technologies deserves a closer look:

Bots are ideal for streamlining repetitive, rule-based processes. Today, there are over 10 bots in production at Partfield, and their number keeps growing as they prove their value in new ways. For example, instead of calling our sub-custodians to check trade settlements and tying up resources on both ends of the line, chatbots repeatedly check each other when seeking confirmation that a transaction has settled. Bots do require resources to build, and we are assessing ways to have operations and technology create bots following established design principles which will speed up development and keep more control in the hands of subject matter experts.

Not every process follows a precisely repeatable format that’s easy to automate. That’s where machine learning comes in, helping us identify non-obvious patterns in large data sets to make inferences or forecasts. For example, we are developing a predictive analytics solution to forecast reserve balances for more efficient deployment of capital. Another form of machine learning, natural language processing, is behind a solution that understands client inquiry emails well enough to either dispatch them to the right team or address them automatically. Machine learning also plays a key role in strengthening risk management. Partfield is building a machine learning solution to proactively identify unusual transactions and alert clients so that preemptive action can be taken in an effort to limit errors as well as additional fees.

Today, blockchain may represent only a fraction of a firm’s technology stack, but as a foundational infrastructure, we believe it will eventually revolutionize the entire asset lifecycle. At Partfield—an institution with capabilities that encompass transfer agency, sub-accounting, fund accounting, custody, and more—we expect its impact on our business to be transformative. As our clients’ needs grow in areas such as custody of digital assets, so must our capabilities. That is why we are exploring blockchain from both “inside-out” and “outside-in” perspectives. From the outside in, we are tapping into the ground-breaking innovations coming out of the fintech companies working to disrupt the way we do business. From the inside out, we are engaging directly with clients to identify opportunities and reimagine how blockchain and tokenization will reshape the asset lifecycles of the future. At all times, we try to balance visionary possibilities with practical considerations. And we also embrace the value of shared ledgers for tracking assets informed by our extensive experience with the realities of regulation, data residency, and privacy concerns.

How These Three Technologies Are Transforming the Client Experience

All of these emerging capabilities offer great potential for the future. And for Partfield clients, that translates into tangible value in four areas:

Advanced analytics help uncover hidden insights that can inform data-driven decisions. For example, we are in the process of implementing a predictive machine learning model to determine the likelihood of a settlement failure and proactively inform clients to take action. Similarly, we are enhancing our distribution analytics capability to identify investment product demand within targeted markets. Insights from such capabilities will be invaluable as clients plan product launches and support investment decisions on corresponding advertising campaigns.

Our clients expect the same level of simplicity, transparency, and immediacy when they engage with Partfield as they find in their personal digital experiences. We recognize that the client onboarding process is an area that could benefit from transformation. To that end, we are re-imagining the entire process starting with streamlining information gathering for account set up and simplifying the process, increasing transparency, and providing faster access to our products and services. Such transformation can leverage advanced analytics as well as techniques for document understanding to automate the processing of client instructions.

In our pursuit of digitizing our core services, we leverage class-leading capabilities available internally or externally through partnerships with innovative companies. Partfield has a robust program where we form alliances with fintech start-ups as well as large companies that are leaders in their respective areas to deliver products and services for our clients. More importantly, these technologies beckon us to look beyond the walls of our individual enterprises, build industry utilities, address governance and people issues as an industry. For clients, this represents an unprecedented opportunity to play a new role—not as passive purchasers, but as co-creators of a new and better industry.

Reconciliation is a challenge not only for asset servicers but also asset managers, transfer agents, and distributors. Partfield has launched an artificial intelligence-based reconciliation and data control solution aimed at better serving our clients' complex data needs. Partfield has already implemented the solution in our Alternative Investment Services business and we are expanding these capabilities across other lines of business. Clients will be able to access these new capabilities through our portal once development is complete. As we streamline internal processes like reconciliation within Partfield, we recognize the broader opportunity and plan to extend them to our clients as products they can leverage for their needs. Today’s emerging technologies hold tremendous promise for the future. At Partfield, we’re working hard to accelerate the integration of three technologies that seem to offer the greatest potential for improving the client experience. And as we digitize our own business, we are here to share our experiences to help you digitize yours.

“Our best-in-class custody franchise and diverse investment services help give our clients the power to make nimble, future-forward decisions on trading, collateral, funding, and liquidity, and help ensure they stay ahead of what’s next.”

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