This article originally appeared in the July 2015 issue of i-invest, an institutional investment magazine published by AI Global Media. Featuring commentary from the industry’s leading influencers, i-invest is dedicated to providing insightful coverage of disruptive and pressing topics impacting institutional investors.
Alternative asset investment requires navigating highly specific regulations, obligations to stakeholders, and operational processes, but the keys to success are shared with any other business model. Successful, sustainable investment firms deliver return on investment and achieve solid reputations through exceptional organization, responsible cost management, and compelling communication with all stakeholders and clients. As the industry continues to grow, and its complexity fluctuates, vertical-specific technology that consolidates ongoing operations becomes an invaluable tool for facilitating long-term, intuitively adopted best practices to maintain continuity in your workflow.
Minimize Manual Error: Daniel Rheault, Dynamo Software’s Director of Product Marketing, recently noted that general and limited partners too often rely on Excel to perform complex tasks such as ongoing portfolio management, performance reporting, capitals calls, and distributions. The problem with this approach, according to Rheault, is that “manual error is intrinsic to human nature…two extra digits [in a cell] create hundreds of millions/billions in financial discrepancies.” Guillaume Fiastre, the CEO of portfolio analytics provider Taliance, echoes Rheault’s conclusion in a FinancialIT editorial, commenting that “spreadsheet-centric organisations are heavily dependent on highly-skilled employees. But today, the level of complexity, the number of parameters to consider and the intricacy of global economies mean these deals can’t be managed solely by an individual.” Entrusting these tasks to an automated industry-specific system eliminates this potential for embarrassing – or even crippling – error, while expediting task completion.
Create a Culture of Accountability: Working within multiple spreadsheets and multiple systems creates the opportunity for data to be lost or mishandled within large email chains. Fiastre states that, “It’s no longer enough that information is held in people’s heads and in thousands of spreadsheets; people leave the company and spreadsheets remain hidden or lost on hard drives. “Placing this information in a centralized system ensures that the proper data remains present and easily accessible.” CRM platforms can be used to assign specific documents and tasks to the relevant internal parties, driving efficient communication across the firm.
Integrate All of Your Data: Deloitte’s 2015 Alternative Investment Outlook emphasized that data gathering and organization has been a significant challenge for alternative asset investors and allocators, largely due to the data often being held across multiple systems. The report also states that “leading alternative asset managers were customizing reporting based on client demand.” Centralized asset management solutions have taken significant steps in eliminating the need for data to be held across multiple systems. Leading third-party data providers such as PitchBook, Bloomberg, Preqin, and BarclayHedge should be directly integrated alongside performance data and proprietary information, empowering firms to deliver the customized reports associated with premier asset managers.
Build a Fluid, Targeted Communications Program: Firms with a large, engaged investor base deliver immense amounts of recurring reporting and correspondence, and these tasks occupy significant time that could be better devoted to higher-level portfolio analysis. Adopting a CRM system delivers the dual benefits of centralized contact information, and direct integration with Microsoft Office tools such as Outlook and Excel. Reports can be generated using the integrated data within the system, while specific contacts can be added to “Mailing Lists” to instantly deliver targeted reports to specific contacts through versatile Mail Merge functionality. Managing communications through a consolidated CRM system also saves monetary expense by eliminating the need for paper mailings.
Optimize Productivity through Configurability: When selecting a centralized asset management system, an industry-specific solution platform enables the software to evolve alongside the firm’s operations. “Customizable” systems, such as Salesforce or Microsoft Dynamics, are designed to be out-of-the-box, standardized products. Any customer-specific changes to the software have to be hard-coded, and these changes can be incompatible with later product updates and create significant challenges to the platform’s viability. Industry-specific asset management systems should boast an open architecture and flexible configurability, empowering the customer to seamlessly update the platform and retain the needed presentation of all feature sets.
Optimize Compliance Projects: Regulations in the alternative asset industry are constantly evolving, and require ongoing, timely cooperation between fund managers and investors. Industry-specific centralized software providers integrate with online investor portals, and this integration empowers investors to directly post fund manager-required documentation online for instant storage and categorization within the CRM system. Industry-specific asset management software providers are also offering dedicated modules that not only track the status of document collection for individual investors, but the continued validity of submitted documents.
Save on Expenses: The ongoing costs associated with maintaining licenses to multiple platforms typically add up to a larger cost than a single system, unnecessarily taxing your yearly expenses. Furthermore, bespoken integrations between applications are subject to malfunction when different vendors update their products. Vendors that provide a comprehensive solution deliver the same services at a cost comparable to one function-specific provider, and ensure data integration continuity amongst all modules and partners.
Consolidate User and Vendor Relationships: Firms that leverage multiple industry-specific technology solutions are subject to different problems than the firms that rely on Microsoft Office tools. Employing multiple software platforms for specific processes can inhibit productivity because new users need a longer amount of time to learn these disparate systems, as opposed to a single centralized solution. Onboarding and operations can also be constrained due to the need to work with multiple service representatives to train new users and troubleshoot support inquiries, who may be unfamiliar with the other platforms the firm is using. Firms leveraging a unified asset management platform benefit from a shorter learning curve for the firm’s operations, and a dedicated service representative with in-depth knowledge of the system.