Tech & Evolving World of Alternative Asset Management!

Valuations - 😟 Had Always Been Worrisome!  O ne of the biggest challenges in Asset Management is to arrive at the fair market price of the portfolio and the assets that are being invested in. This challenge multiplies as the portfolio becomes more illiquid with few reliable sources of valuation data. Some of the biggest fund failures over the last few years like the Third Avenue Asset Management collapse have been attributed to badly mispriced securities.  In the aftermath of 2008 financial crisis Valuations of securities at Funds has been in focus with investors and regulators. Investor due diligence increasingly focuses on valuation policies, processes and models. Regulators across the globe have focussed on Valuation processes and increased their oversight of how assets are being valued. A big learning from the 2008 financial crisis was how lax some of the valuation processes had been with even the larger banks which created knock-on effects up and down...

Deals Getting Complex! The CEO of Blackrock - one of the world’s money manager, Larry Fink had once said  “Using technology is critical, It’s critical for us as investors, as we’re spending more time analyzing new sources of data, spending more time creating algorithms on the new sources of data. And we’re using technology to be more connected with our clients to help with financial literacy, to help all our clients navigate all our clients’ money.” The best Fund Managers including those at Goldman Sachs, JP Morgan or Blackrock are making outsized bets on technology to manage the business of investment. As Fink goes on to say “Technology will change the entire eco-system.” Technology has traditionally been deployed to reduce Operational Costs and get better access to data. But increasingly it is being used to manage the entire process of Investment Management. Fund Managers are increasingly developing sophisticated tools and techniques to manage the front end of th...

Redefine Alternative Asset Management The key pillars on which this business is built are (a) Investors, (b) Deals & (c) Effective Fund management over the life of the fund. The expertise of the Alternative asset managers lies in managing these three fundamental constituents of the business and his success depends on how well he copes and competes to get these key drivers of the business right. He weaves all his strategies and the various functions around these three fundamental pillars. This central theme and these fundamental drivers are the fuel for any alternative asset manager’s growth engine in his business! Easily the most important aspect of the business is to have the right long term investors who believe in your business. For early stage managers it is often difficult to establish trust with Investors.   Fund allocators across the globe have shown lesser confidence in the alternative asset class and even less so with a new alt asset manager. Som...

Data is the New Oil “Data is the New Oil” . Oil Powered Industrial revolution, transformed our lives adding a new dimension to the way we live in today’s world  Data is poised to power Information revolution and we are witnessing another transformation adding again a new dimension to humanity, redefining the way we are making decisions and the way we would make decisions in the times to come. Sounds good and fancy too! But how does it really relate to me as an alternative asset manager? The question is very pertinent and calls for a deliberation. Today data is produced at a feverish pace at an exponential rate of 4400% of what was being produced a decade back. This rate of rate of producing data too is growing exponentially and we would witness unimaginable amounts of data that is going to be produced. What we process today? Less than 3% of the total produced data!! This is huge gap and points to a big opportunity, just imagine if we could optimize the data capture and ...

As the alternative assets gather critical mass and readies to explode the Private Equity firms are into a phase of transformation. External factors are creating more competitive deal environment challenging & crumbling the traditional models of investment sourcing and execution. Internally it amounts to increased pressures & responsibilities on the GP’s of reporting more information and more often to the LP’s who are becoming more and more demanding on information sharing. Today the funds have become more complex and the LP’s are now seeing themselves in a greater role of involvement in the business and demand transparencies of much higher levels, asking for more live relevant data on demand and in time. Not to forget that data has a shelf life and its relevance short lived. There are reasons to this behavioral  transformation of LPs. Today investor can be LP in the fund & can also be co-investing into the asset along with the GPs directly, the line...

Alternative Asset Management and Technology It’s astonishing that the $30 trillion asset management industry still relies on 76% of its tasks on spreadsheets. Asset management, and technology, are natural partners, where the industry generates tremendous amounts of data, and technology of-course hopes to manage that data. With the growing demands of getting better returns, increased transparency and regulatory demands, there is an increased push towards better tools and technology solutions. In this series we take a look at some of the challenges of current players in the market. Legacy software’s approach to business - Legacy software’s were written in early 2000 addressing the challenges of simpler asset management needs, and very old technology. They were designed to be “point solution” for the alternative asset managers, addressing needs of wither just the accounting or risk or trade management but never a complete data platform. Cost of the technology – The eco...

Alternative Asset Managers with today's business complexities have a few perplexing choices to make to start manage their data intelligently. With limited “point solutions” as options, the choices for building a world class infrastructure for asset manager are difficult. Incredibly many of these solutions were created over two decades ago, for a very different industry. None of these point solutions provide a holistic 360 view of the business of asset management. With limited analytics, outdated user interfaces and zero interoperability they are a management nightmare. An asset manager often spends hours mashing up deal strategy information with valuation data and  cash flows  and combine those with investor data to get the return analytics he needs.  Its often said “Data is the New Oil”. Pepper is the new comprehensive, flexible, scalable cloud based platform for Alternative Asset Managers. Pepper enables the modern alternative asset managers make more intellig...

Alternative asset manager  be it a Private equity manager or a hedge fund manager or say a Family Office manager ,  has needs which are different from the software solutions currently available on the market. Where alternative asset manager needs a 360 view of his portfolio, his functionaries for example the accountant  has a more pointed problems at hand  he is only interested in tracking  the cash flows,  assigning costs to individual transactions etc which is limited to an area of the business accounts. The software solutions deal with just specific aspect of the business or are "point solutions". This leads to a huge gap between what is needed and what is available for the alternative asset managers today. An asset manager is managing different assets under his fund and has varied needs of data. A complex asset manager like a Blackstone or Carlyle of today would be managing a Private equity fund, a Credit fund, Real Estate Fund, a Distressed ...

Alternative Asset Managers have many challenges today. Alternative Asset Management market is not the same anymore as what it used to be say 2 decades back. Everything around us have changed drastically, but unfortunately and for a strange reason the tools and software are the same which were created then. The reason to this is that the software created then had huge costs and are still in the process of recovering the cost of creation, also these solutions have pretty high cost of installation, management, and maintenance. This makes it almost impossible for the startup and mid-market asset managers to even think of these as they have just started and have only limited funds to manage their show. So technology is the last thing on the minds of these mid-market private equity managers to invest in. Even for the big asset managers the problems with technology are many. The solutions which they are using or are currently available in the market are mostly point solutions and there i...

Alternative Asset Management industry is in for a disruption now, tech adoption has been poor as compared to other industries like Media, Commerce etc where they have seen a major difference in the way the industry used to operate. We are either stuck with those complex ERP solutions designed way back in late 90's and early 2000's or just don't have any solutions other than relying on the spreed sheets. The Tech solutions which were conceptualized 2 decades back are  mostly point solutions and have a huge cost associated with that technology. So where the large Asset Managers despite their investments cannot have the holistic view of their business the startup managers and the mid-market Asset Managers cannot even think of such a technology because of the huge investments required. Watch Founder and CEO of On Pepper, Mr. Pulak Sinha talk about it and the reason to why we exist!