IVP Newsletter - Half Yearly, Dec 2020

As we near the end of 2020, I reflect on the challenges we faced as individuals and as an industry. Life was upended and the future was uncertain, but together we pushed on in the search for a better tomorrow.

Our frontline healthcare providers, first responders and scientists who are helping to save lives are true heroes. They, along with the tireless efforts of essential workers to maintain global supply chains, have shown us what compassion, persistence and determination truly are.

As new challenges emerged from the pandemic, we also witnessed the global financial industry, and the numerous services, solutions and networks that support its function, put to the test. Facing intense pressure to quickly adapt, managers focused heavily on solving these challenges across their funds’ internal operations through the acceleration of their digital transformation.

The year ahead will likely pose a number of new challenges but will also open the door to new areas of opportunity, evolution and growth for the financial industry. From here, success and further growth will stem from a sustained focus on innovation as the industry pushes ahead with its transformation.

We hope you and your loved ones continue to remain safe and healthy during this unprecedented global health crisis and, together, we will emerge stronger in a post-COVID world.

- Gurvinder Singh, CEO of Indus Valley Partners

Traditional and alternative managers have faced numerous challenges over the past year spanning firm-wide operations, data and infrastructure. The quick shift to a decentralized work environment, due to the sudden rise in COVID-19 cases that brought forth unforeseen levels of market volatility and economic uncertainty, enhanced a number of existing industry issues like cost compression while introducing new challenges like business continuity and communications.

Over the last nine months, it became clear that the managers who had previously implemented a digital-first operating model, leveraging digital-first outsourcing partners, integrated digital workflows and strong in-house data management, fared much better than those who were not “digitally organized.” As a result, many firms were forced to find ad hoc solutions to overcome the operational bottlenecks that coincided with the decentralized work environment, increasing the potential for error and friction in manual workflows over email along with headcount reduction to cut costs.

However, these challenges were met with increased innovation by solutions providers taken up by some forward-looking firms willing to use the opportunity afforded by the crisis to make strategic technology investments. According to a study by Greenwich Associates, “over a third of the managers surveyed plan to increase their technology budgets in the future, with the largest increases expected by midsize firms and North American managers,” noting the pandemic as a driving factor for this shift in sentiment¹. With that being said, we have identified three trends that are beginning to emerge and will continue to develop in the year ahead as managers look to strengthen their core processes and remain competitive through the application of technology, ultimately accelerating their digital metamorphosis further:

• Data as a Service (DaaS) Becomes Mainstream: Frequent failures of data projects to deliver quantified value has caused a noticeable fatigue in the industry as firms have had to implement solutions and processes that are never fully in sync. For many, tangible results have yet to be seen, despite implementing these projects over multiple years, due to their ad hoc nature, lack of a proper data management foundation and attempts to implement multiple solutions to achieve their goals. Coinciding with this failure to deliver by internal dynamics, a growing appetite has begun to take shape for Data as a Service (DaaS) that is digital-first in nature from firms seeking data that is cleansed and normalized by providers on a fully managed basis. With this type of offering, managers can receive fully processed and cross-referenced mastered data straight into their operational data store (ODS) or cloud layer, thereby allowing them to focus their energies on deriving meaningful insights.

• As a result, we will begin to see players, both large and small, shift toward this type of model so long as they have good digital-first providers enabling this service in an auditable manner and an internal scalable data layer to consume/stitch the datasets together for fast and more accurate analytics.
• An Established Design Pattern to Build a Scalable Analytics Workbench Becomes Mainstream for Asset Managers: With an industry continually seeking new ways to tap a competitive edge, many have implemented data in all shapes and sizes, from big datasets to alternative datasets. This influx of information over the years has led many to realize that they can derive faster analytics with the concurrent rise of native cloud platforms like Azure Synapse, AWS Redshift and Snowflake, making information accessible to users firm-wide with the front office being the latest to hop on board. However, analysts are finding that 1) there is far too much noise in raw datasets to be of value, 2) data in its raw form needs to be wrangled before analysis and 3) data needs to be combined and cross-referenced with clean operational data so that the portfolio impact can be assessed. Because of this, the need for an “analytics workbench” in the user’s cloud platform of choice has emerged where firms can combine clean/wrangled big datasets with internal clean, cross-referenced and normalized operational data. In this emerging architecture, the classic operational data store (ODS) plays a “fulcrum” role in enabling the front-office analytics workbench for fast analytics and the quick onboarding of datasets. Most buy-side firms are creating scalable cloud data layers to create their IBOR and are leveraging the ODS for the ABOR in a cohesive, synchronized architecture that creates a scalable, flexible data management capability for their end users.
• Allure of Private Markets Continues to Increase Through the Pandemic: The COVID-19 pandemic and ensuing near-zero or negative interest rates have created a strong disincentive to sit on piles of cash, leading many to look to private markets for a safe target return-type strategy to deploy their leftover capital. Especially now, private debt and other private fund strategies, like private equity, infrastructure and real estate, have continued to attract capital due to their consistency in returns through various market cycles. To further showcase the attraction of these markets for investors, “Preqin predicts that global private equity AUM will reach $9.11 trillion by 2025,” and “private debt is expected to grow 11.4% annually to $1.46 trillion in five years².” Unfortunately the firms in this space, however, tend to suffer from fragmented workflows and spreadsheet-driven processes, causing managers to struggle as they scale their businesses. More and more private fund managers are now starting to leverage technology to help increase their flexibility and reduce operational risk as these strategies scale. As a starting point, firms will have to invest in their core automation and accept the need to consolidate their datasets into one golden source to eliminate the back and forth that is currently involved using manual spreadsheets. By having a single “golden source,” firms will become more automated, efficient and accurate in their day-to-day processes as it provides a single source of truth for all key teams, including operations, risk, compliance and investor relations. Unique capabilities are also made available from the maintenance of a golden source, such as looking at actuals vs. projections and how they have changed over time, thereby leading to the potential for AUM growth. This digital organization will be the true indicator of success amongst managers as this area continues to attract assets.

Looking to 2021 and beyond, it is hard to predict exactly what will play out as the arrival of the pandemic earlier this year is a perfect example of just that. However, one constant that remains true is asset managers’ growing desire to take their digital transformation to the next level by introducing technology and automation to achieve new efficiencies and operational continuity. By traveling farther down this path, not only will firms be better prepared for any challenges the future may have in store, but they will also find new areas of growth hidden within their current processes, allowing them to continue operating seamlessly and efficiently in the ever-evolving work environment.

^[1] Davis Walmsley, “Pandemic Perspectives (Part 7) – Managers Adapting through Crisis,” Greenwich Associates, May 6, 2020.

^[2] Arleen Jacobius, “Big jump in private equity AUM expected over next 5 years,” Pensions & Investments, November 9, 2020.

Moving up the data maturity curve to harness competitive insights and propel forward

Asset managers have quickly come to realize their need to implement a comprehensive data layer or centralized data repository as the foundation of their firm in order to continue operating efficiently and retain their competitive edge. However, most have yet to reach data maturity, meaning that they are not operationally equipped to deal with data in a fluid manner and the many factors that coincide with its proper management to ultimately reach a place where they can leverage data science to generate insights. In fact, according to a poll of participants in a recent IVP webinar, 20% are still currently in the “Data Chaos” stage of their data journey with 40% in the “Isolated Data Projects” stage, both residing on the earlier side of the data maturity curve where data insights delivery is in far reach.

As data’s volume, velocity, variety and veracity evolves, the demands on data layers are also changing fast, leading many who are in these preliminary stages of their journey to continually face issues that span data consistency, consolidation, transparency and governance of both operational and new alternate datasets. In IVP’s webinar poll, 77% of participants claimed they lack a centralized place within their organization for key functions like data discovery and consumption, causing them to continue to struggle to move up the data maturity curve.

Additionally, when asked how quick and easy it is for them to set up integration with a new source system, 38% of poll participants cited that the process is “hard and slow,” which means their organizations lack the flexible architecture needed to continue onboarding new datasets easily and efficiently. With this, managers are beginning to realize that they can no longer function in such a decentralized and fragmented way, especially within our ever-evolving remote work environment.

Data Maturity Curve

With IVP’s Master Data Management (MDM) solution that implements IVP’s reference architecture for the buy side by combining both an operational data store (ODS) and a scalable cloud MPP data warehouse, asset managers can now move away from their use of patchwork, opaque systems that were not designed to work together and, instead, turn their attention to a comprehensive and integrated platform that provides the ability to flexibly and rapidly add new datasets using low-code/no-code GUIs. IVP’s reference architecture enables buy-side firms to marry a traditional ODS containing all of its calculations and datasets and merge them seamlessly with alternate market, non-numeric datasets in cloud platforms like Snowflake, Azure and Redshift. From here, managers can tap fast analytics when they start crossing into big data territory (> 6 TB).

In essence, this reference architecture allows managers to solve many of today’s data challenges by organizing, categorizing and localizing their diverse datasets with an integrated solution. By providing data processing, federated governance, lineage, catalog and distribution with a no-code implementation model, key business users are enabled to set up data flows and productionize them rapidly.

IVP’s Master Data Management cloud-based suite includes all of the solutions asset managers need to successfully acquire, process, store, move and keep track of any mix of data throughout its life cycle. Comprised of Security & Reference Master, Entity Master, Enterprise Data Management, Polaris and Decision Science, managers can leverage IVP MDM to move further up the data maturity curve as they look to tap competitive insights in their search for alpha. Learn how here.

COVID-19 has dramatically impacted the sector outlook for the year, putting private funds, their investment strategies and their portfolio companies to the ultimate test. Through the many challenges faced by these funds, a common theme that has emerged is the stronger drive towards digitization with transparency and ESG taking a more pivotal role.

Heading into 2021, the drive for greater transparency remains an absolute priority for private funds and their stakeholders, particularly regarding portfolio performance. With this, ESG considerations have also escalated in importance, specifically in terms of how firms run themselves and the companies in which they invest, leading many to employ smarter technologies and digitization to drive operational efficiencies that support the push for greater transparency and new investment opportunities.

• Automated processes to manage and monitor diverse datasets
• Approval workflow processes with multiple levels of data validations for better data control
• Seamless communication enabled within the firm and across portfolio company contacts

• 360-degree views and analytics for deals/funds
• Insights generation based on a cognitive engine and exhaustive calculation library
• Power BI supported by customizable analytics generation
• ESG-focused data tracking and insights for funds

• Golden copy of deal data with bitemporal data management
• Operational processes supported from pipeline to deal exit
• Custom management for KPIs, covenants and documents for the investment portfolio

We are pleased to have been recognized this year for our best-in-class services and solutions

FundFire | Man Group Looks to Tech for Investment Edge
Dervedia Thomas | November 30, 2020

Hedgeweek | Securis selects Indus Valley Partners to automate pricing process
Staff | November 20, 2020

Hedgeweek | Hedgeweek names 2020 US Awards winners, hosts virtual networking ceremony
Nick Evans | October 29, 2020

Institutional Asset Manager | Indus Valley Partners sees accelerated adoption of a digital-first model by global asset managers
Staff | October 6, 2020

Hedgeweek | Coronavirus has accelerated asset managers' adoption of a digital-first model, says Indus Valley Partners
Staff | October 6, 2020

WatersTechnology | IMD & IRD Awards 2020: Best Data Governance Solution—Indus Valley Partners
Staff | September 24, 2020