Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Money Management Executive can deliver.
  • Exclusive Online Only Content
  • Free Daily Email News Alerts
  • Asset Management Blogs

Marrying Scale With Boutique Service

Back in 1994, John Reed was elected chief executive of Citicorp, shares of stock in India were traded in lots of one and Neeraj Sahai became a management associate charged with helping handle relations with large financial institutions in Mumbai.

Today, Sahai is based in New York, as global head of securities and fund services for the company, now called Citigroup. In its worldwide rivalry with State Street and Bank of New York Mellon, Citi's fund services operate in 60 markets that account for roughly 98% of the capitalization of public companies. And is rolling out securities services in two to three more markets every year.

The challenge now, by Sahai's account, is to marry "bespoke" service with large-scale technology that runs on common systems and processes, worldwide.

"In a way, our business is an institutional business on one side of the fence. And our clients tend to be large by nature. They are big sophisticated buyers of our services," he said in September at the SWIFT Internation Business Operations Seminar in Toronto.

"On the other hand, it is a high-volume technology, scale-driven business," the international fund services executive said. "So it is trying to marry an institutional boutique kind of business on one side with the scale activity on the other" that Citi hopes will set itself apart.

Sahai's been at the intersection of both improving technology and service to fund firms since he became head of transaction services for India and a senior country operations officer, nearly two decades ago.

Back then, the Indian government was in the early stages of trying to attract foreign capital. Markets were rudimentary. Outsourcing hadn't become part of the nation's lexicon or economic growth.

If you were a foreign investor, "you didn't expect the uniqueness of India to sort of impede the way you functioned," Sahai said.

Yet executing a stock transaction was not handled at all like it was in North America or Europe.

A stock might trade at 20 cents a share. And there weren't 100-share certificates. Only single-share certificates.

So, if your fund wanted to buy $100,000 worth of shares, that would mean 500,000 pieces of paper. One per share.

The solution: Imaging technology. Citi began taking snapshots of each certificate.

The paper-the shares-would be sent to the new owner, for settlement.

The images would then be cataloged and the information about each share "enriched" and passed along, in parallel, for reconciliation and rapid clearance.

Customers got both speed and more information than in the past. Then Sahai and his transactions team applied a precursor to outsourcing.

The Indian operation set up a "captive" company, called Citil, now known as Concept Information Technologies, to take on the day-to-day operations and flow of work. Citil subsequently was acquired by Tata Consulting Services.

"It fundamentally took workflow out of a banking environment into a manufacturing environment, and that made the big difference," Sahai said, "because manufacturing is a technology scale-driven business and banking traditionally has been a boutique client experience kind of business. So, one could marry the manufacturing capabilities and the manufacturing workflow with a banking customer service mindset."

That became a precursor to Citi's journey of the last 15 years to create a global operating environment.

The twin goals: Use technology to provide a foundation for serving institutional investors any way in the world; and, use the knowledge it gained in the process to act as a bridge between local capital markets, local regulators and the global investors that, ultimately, were its clients.

In Sahai's view, Citi could become a "knowledge intermediary," explaining differences between markets to its customers and helping make those markets more efficient.

Those differences could range from nuances in settlement cycles and practices, to different mechanisms for managing collateral, to how to handle different approaches to securities lending.

That could be as seemingly simple as explaining why the "depth of market'' in a given company's shares might not be what it seemed, because only 5% of its shares are floated while the company's market capitalization might be calculated as if all 100% were.

Or trying to help regulators in new markets figure out how to handle the shorting of securities, a necessary feature of securities lending.

So, in 1996, Sahai moved to New York to help set up Citi's securities services strategy.

That would entail setting up common systems, common language, common processes and common training approaches for clearance, settlement, fund accounting and administration. This would start off with stocks and bonds, and over time, expand to futures, options and other derivatives.

The idea was to try and establish a "social DNA" inside the company that would facilitate expansion of its services globally.