Tech & Evolving World of Alternative Asset Management!

PE Performance on Excel- Rocks You Like a Hurricane! For a Private Equity Fund like any other business Performance Measurement remains the key focal point apart from other important aspects of business like raising the fund, valuations, deal making, compliances etc. It is important for both, the GP’s who would like to choose upon the metric which can project the fund as top quartile and for the LP’s who would like to dig with other metrics to reach to the actual evaluation of their investments and returns, for their investment decisions! The fund performance evaluations hold an equal interest with investment advisers who would be interested in knowing more than just the performance of a particular project but would be interested in comparing these investments with other funds which bring in the complexity as there are challenges like comparing an apple to apple to reach a logical conclusion. The challenges arise due to the size of the different projects being compared, geo...

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...

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...