Taking a Massive Leap of Faith With Technology

There are a number of drivers that contribute to this trend – the alternative investments market-place has become, for lack of better words, saturated. Alpha is elusive, and private equity allocations with really good managers are hard to get in to. On the public side, managers with great returns are smaller in size (AUM) with smaller track records, which automatically disqualifies them from the selection process. But sure enough, by the time they become big enough to be considered, and have sufficient TR, they are too big and already losing their ability to generate huge alpha! As a result, many endowments, foundations and family offices are looking to technology to provide the edge.

Another factor fueling this trend is the number of data sources. A typical Investment Management firm subscribes to Bloomberg, Cambridge, Albourne, Prequin, Private Informant, and of course, data from custodians and other service providers. This data is not cheap, “So why not use it?”, is the question that is often asked. Again, technology comes to the rescue. With data science now becoming a new discipline, the ability to aggregate, infer and predict is no longer a pipe dream.

Product vendors contribute to this trend as well! Each vendor, be it Code Red, Tamale, Alladin; they are all catering to their specific segment and function – not one product was built to cater to endowments, foundations and family offices! Even if we manage to find one such product, the adoption rate is low and hence there is the fear that the product might not sustain. As a result, many offices have investments in one/many of the more known/accepted products. Operations and investment teams are demanding that the information trapped in these silos be freed and made available to all functions! And the only way to do this is by making technology investments.

Last but not least, technology is evolving rapidly! More focus is being put on getting data in the hands of users! Business intelligence being the case in point. Similarly, user experience tools have improved drastically; thereby making the presentation of relevant information clear and concise.

Endowments, Foundations and Family Offices that have been consistently make technology investments have richly benefited from doing so. They have systems that bring in capital calls and other documents directly in to their operations work-flow and accessible from rich user interfaces. Similarly, they normalize data from multiple data sources in to one data warehouse and use that single source to drive investment analytics, operations reporting and business intelligence reporting tools. While this might seem like a big leap for many organizations, working with a trusted technology partner who specializes in the domain helps negotiate the maturity curve faster and effectively. Last but not least, probably the most important, none of this will happen without strong executive support from the C-suite!

In subsequent posts, we will dig deeper in to the various aspects of technology – infrastructure, software engineering, security, data management, business intelligence and application development.