On April 1 this year, after several months of painstaking preparation, Standish Mellon Asset Management took on the assignment of monitoring $2 billion in fixed income assets managed for Aviva Life Insurance Co. by three other investment firms that, just like itself, manage insurance assets.

On its own, this was an interesting development for the insurance asset management sector. But the oversight assignment turned out to be only one half of the mandate, because the Boston-based subsidiary of Mellon Financial Corp. (MEL) was also selected as third-party manager for an additional amount of $2 billion in fixed income assets.

The dual assignment "is a somewhat unusual mandate from an insurance client," Thomas P. Sorbo, Standish Mellon vice chairman and chief operating officer, said at the time of the mandate's announcement. In an interview last week with IFI, he went further and said he is confident the industry will see more insurance companies looking for a third-party firm that can perform a monitoring role as well as manage assets. Knowing that a third-party provider has superb analytic and compliance systems will further lower resistance to outsourcing. This is becoming particularly important, Sorbo added, where multiple managers, as in the case of Aviva, are involved.

From the point of view of Hans L. Carstensen III, Aviva's president and chief executive officer, the operative word in selecting a firm like Standish Mellon is "strategy." He explained to IFI: "To the extent that we can utilize the sophisticated analytical and actuarial expertise in place at Standish Mellon, we will be able to bring together our asset/liability management and our asset management programs into a single company-wide investment strategy."

Sorbo is in agreement, saying the different elements of the Aviva oversight assignment provide the company and Standish Mellon with the ability to "think strategically about the balance sheet as a whole." In its monitoring role, Standish Mellon's assignment is to oversee performance attribution and compliance in a variety of portfolios that are managed by the Morley Fund Management, a wholly-owned subsidiary of Aviva Life parent company, Aviva plc of the UK, Principal Global Investors of Des Moines, IA, and Sun Capital Advisers of Wellesley Hills, MA.

"This is a highly skillful coordination issue," said Sorbo of Standish, "involving the matching up of separate portfolios against product lines, multiple manager strategies, analytics, investment reporting, compliance monitoring and regulatory issues - this is not something that is easily done on an Excel spread sheet."

Every day since April 1, trades and portfolio data from all the investment managers have been funneled into the Standish Mellon compliance module to be analyzed. "Our job," said Sorbo, "is to be timely and responsive with our portfolio analytics, to be able to disclose detailed positions last week, last month and last year in order to answer the vital question: Where did the performance come from?

"With the information our systems provide," Sorbo added, "our clients are comfortable that they will continue to know and understand their portfolios."

Standish Mellon is one of very few insurance asset managers with the capability to oversee performance attribution and compliance, and its $2 billion plus $2 billion oversight/management mandate was certainly sizeable enough to draw considerable attention and to be described as "a watershed deal." The firm's assets under management now total more than $10 billion.