What’s more impressive to your investors...a $10B AUM fund with $50M of AUM per Full-Time Employee (FTE), or $500M of AUM per FTE?
In other words, is it more impressive to see $10B of AUM managed successfully and efficiently by 200 people, or 20, respectively?
…it’s probably fair to say the latter.
The all too common story of the leaders and the followers within the hedge fund and private equity industry depends on “how well the machine is built.” By that, we mean, how well does the hedge fund or private equity firm scale as it grows? Does your firm need a mid-office and back-office in proportion to the size of AUM, or can you leverage processes and technologies to scale efficiently?
Leading industry research has found asset managers that optimize their operations with technology are growing their revenues 1.5x faster than their peers.
If you’re looking to learn about areas that can help you scale well, and spend more time investing money, then you’ve come to the right place. Here are just a few areas that we see are core areas to invest in to have a scaling bedrock built into your fund:
- Data analytics
- Accounting
- Fund administration
- HR administration
- Invoice creation and expense management
- Expense allocation and compliance
- CRM management
- Communication systems
- Project management systems
- Investor onboarding
- Deal sourcing
In many cases, spreadsheets and manual processes are still cemented strongly into operational environments across a wide variety of asset management firms.
Outdated investment technology and business models often stand in the way, adding costs and risks that can weigh firms down. A “technological sticky-tape” approach simply cannot support the kind of innovative investment strategies and multi-asset class approaches that firms are exploring to reinvent for the future. Hosting, cloud services and outsourcing can help.
To get you started on a path towards digitization and operational scalability within your fund, we want to share 3 software solutions to get you started that will help your hedge fund or private equity firm grow, while also ensuring compliance with the latest SEC guidelines.
Keep in mind, this is just a start, and if other areas of your firm are more in need of technology, you can reach out to us at [email protected], and we’d be happy to consult on how we believe you can best digitize your fund to achieve scalability and operational excellence.
Without further ado…3 software solutions to help you scale.
#1 — Expense Allocation Software: Resolvr
find out more about our expense allocation software, Resolvr, here
Expense allocation and expense allocation software has been a hot topic in recent years.
You can find a more detailed deep dive on the topic in our earlier topic here.
The SEC not only mandates transparency in how hedge funds and private equity firms allocate expenses, given they’re both “advisors” as defined by Dodd-Frnak, but also expense allocation has become a hot topic for the agency in recent years, they event released a Risk Alert report letting funds know they’d be on top of the subject. We have more on that on our website and expense allocation software product site.
Not only is expense allocation relevant for fund compliance, but also, it should be a must have feature of any expense/invoice management solution to save both time and increase profits.
Cost savings were quoted as the biggest driver of IT spending for asset managers in general, with 36 percent ranking this among the top three benefits their technology spend must deliver.
All the above. That’s what we’ve built with Resolvr, an expense allocation software platform which serves a number of clients, including top 10 global hedge funds. The whole idea here is to help funds scale their finance departments, and we’d offer the same functions as a Concur-esque software, combined with an allocation compliance software. We’re also able to handle either of those needs separately and just plug into whatever you’re currently using.
The solution reduces operational hours required to create, process and allocate electronic invoices by a minimum of 40% ROI. That means a cost reduction of 40% at least, consisting of both time and employee savings. We take invoices that take a week from submission to approval and allocation down to a few hours at most.
Resolvr features low month-to-month SaaS pricing and interoperability with existing hedge fund and private equity fund software solutions, such as Geneva, HazelTree and QuickBooks…in other words, it’s a turnkey option, which you should expect from all your technologies.
Resolvr provides the “pitch” for all stakeholders to handle, review, modify, approve and allocate invoices, with built in communication tools and time management
Expense allocation is a relatively specialized field, which is why we’re proud to bring a 15+ year history of experience in spend management.
In our sister company, LSG, we’ve saved our clients over $500M in operational costs. We are one of the few private companies to do so, which means customer success comes first.
#2 — Invoice Management Software: Bilr
To complement expense allocation, we offer Bilr, an end-to-end (invoice creation, review, approval, allocation and tracking) e-billing and invoicing software solution. A keen sense of operational costs is a key part of funds mid-office and back-office solution set.
Bilr works for any company that processes large volumes of invoices as well as legal and non-legal vendors. We have both mobile and desktop-enabled solutions in place to make billing a seamless, and profitable experience, interoperable with any enterprise software.
We made this product as a bolt-on to Resolvr, which can also serve as a profitable standalone product to improve your product margins.
find out more about our invoicing and e-billing application, Bilr, here
Bilr’s AI-powered technology gains a thorough understanding of your business based on information gathered from past performance records, current activities to provide flawless future projections and efficient organisation that is compliant with regulatory requirements.
#3 — Investor Onboarding and Deal-by-Deal Sourcing: DigitalShares
Switching over to the front office, we’ll talk about our investor onboarding and PE/VC deal-by-deal white labeled marketplace, DigitalShares.
Why is a digitized onboarding experience important to scale your fund? Investors expect a modern onboarding and portfolio overview experience, and funds lose a keen advantage on investment opportunities if they’re not subscribing to deal-by-deal investment opportunities. In all other areas of our lives, in 2019/2020, we’re expecting a high quality UI/UX experience, and transparency in the service we’re being offered.
As this expectation relates to funds, that means investors want to know how the fund is being run, what deals are in the pipeline, and ideally they can become an investor with an online onboarding experience. This won’t replace the high touch relationship aspect common between GPs/LPs, but it’ll enable it to scale.
All a fund manager needs to do with an interested LP in this case is send them an onboarding link, which enables a quick KYC/AML and accreditation verification process.
This front office experience requires a keen expertise in both compliance and cybersecurity, which we offer through our front office product, Digital Shares, which we can offer through the cloud in an ISO 27001 environment.
Other examples of players in this market (across various strategies and stages):
- AltoIRA — IRA-funded alternative investments (more relevant for HF/PE)
- EquityZen — online marketplace for trading pre-IPO employee shares
- SharesPost — buy and trade pre-IPO shares and private funds (more relevant for HF/PE)
We aren’t the only ones that recognize this fast growing opportunity…Global alternatives AUM rose 11% in 2017 and are expected to grow at an 8% CAGR from through 2022.
Conclusion
Leading fund managers are leveraging technology across the back, mid and front-office to achieve superior revenues and profit margins. You should too.
If you are a fund, or would like to earn a referral commission on a fund, and are looking to leverage technology, specifically the three aforementioned products, or products in the other areas mentioned, you can visit our homepage or email [email protected] with your specific interest and we'll get back to you within 1 business day.