Master a New Frontier: How Asian Investment Firms can Mitigate Risk with Alternative Asset-Specific Investment Management Software

Master a New Frontier: How Asian Investment Firms can Mitigate Risk with Alternative Asset-Specific Investment Management Software
Jason Doring

While the geopolitical landscape is never static, the uncertainty around the coming year may be unprecedented. The ongoing Brexit process is uncharted economic territory for the European Union, and while the outcome of the 2016 US presidential election will surely have an enormous impact on international investment markets, the type of impact remains unknown. As these political transitions take shape, one of the world’s most powerful economic regions is already taking steps to ensure continued prosperity.

Jennifer Li of the South China Morning Post recently published a detailed article making a case for the Asia-Pacific (APAC) region’s move to a more alternative asset-focused portfolio. Ms. Li sources Matthew Riley, the head of the Natixis Portfolio Research and Consulting Group, who assures that this move is necessary for APAC-based firms. Mr. Riley’s rationale for this shift is that these types of investments can generate more stable long-term returns and are less susceptible to outside market forces. The article also notes that Northern Trust is already seeing increased allocations to alternatives by APAC limited partners.

However, traditionally allocations toward alternative investments are lower in many APAC countries – Ms. Li’s article states that alternative investment allocations have been inhibited due to a lack of education around these asset classes, and misconceptions based on the US’ high profile scandals and failures in this market. Mr. Riley adds, “The asset management industry hasn’t done a good job of educating people.”

Education in these complex investment strategies is imperative in order to thrive in a new macroeconomic environment, and in a region where immediate resources may be sparse, APAC firms should be consulting subject matter experts. Many industry-specific investment management software providers have been expanding into the APAC market in recent months, and engagement with these vendors represents an opportunity to obtain best practices for successfully investing in, and managing, alternative asset classes.

The most important functions that alternative investment management platforms can play in a skeptical market are ensuring a comprehensive data organization policy and promoting transparency to stakeholders. Industry-specific software typically provides comprehensive integration with Microsoft Office, and can easily import critical documentation, correspondence, and other records using dedicated plugins. When this functionality is complemented by relationship tracking features that automatically associate these records to relevant contacts, funds, and opportunities, firms can have all relevant context for investment decisions at their fingertips on a single screen. Integrated asset management systems are also able to pull in research data from industry-leading research firms, furthering insight into the marketplace and offering a competitive edge.

The trepidation that APAC investors may feel about alternatives may be alleviated through adopting an Investor Portal to ensure the appropriate amount of transparency. An Investor Portal, which can be reached through a firm’s website and align with digital branding, provides investors with instant access to performance reporting, balances, transactions, and investor communications. Providing investors the ability to update their own records, notification preferences, and generate their own reports ensures that they not only have transparency, but also require significantly less support from investor relations staff.

Beyond effectively organizing incoming records, correspondence, and managing relationships, configurable investment management software platforms provide significant benefits for portfolio analysis and reporting. Each alternative asset class has different reporting standards, levels of liquidity, rates of return, and regulations. Selecting an industry specific-technology provider enables APAC firms to leverage the experience these companies have building platforms to manage these tasks. Many offer dedicated modules for tracking granular levels of exposure, monitoring progress towards meeting compliance standards, and comparing performance against top industry benchmarks.

The human element of adopting an industry-specific platform is equally as important as the software’s functionality. Firms enjoy a much more intensive implementation and support relationship with their vendor, and receive a much faster response to inquiries than generic providers. Product and implementation specialists for these vendors also have deep experience scaling a product when a client’s needs outgrow current functionality. These implementation specialists work closely with internal information technology specialists and power users to create a best-in-class system that seamlessly support the most dynamic firms. Additional detail on the benefits of an industry-specific service experience are detailed in our earlier service-oriented posts from 2016.

The Asia-Pacific region has identified the alternative investment market as a potential port in an oncoming storm. Maximizing the value of these allocations, and delivering superior performance in a crowded, innovation-focused marketplace is dependent on consistent productivity and exceptional insight. Industry-specific platforms provide firms with the tools needed to streamline unfamiliar processes and compel trust from investors, and the expertise to derive in-depth analysis.