the technology advantage - sherpa funds technology€¦ · the technology advantage richard...
TRANSCRIPT
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The Fund Universe: Funds>70m AUM, Returns from Jan 2006 to Dec 2012
Source Eureka Hedge
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The Fund Universe: Remove the Outliers, Zoom In
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Prequin Investor Survey 2014 Data
Institutional Investors use hedge funds to add a source of uncorrelated, risk-adjusted returns to their portfolio, NOT for double-digit returns.
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So Who is ‘On Target’? (Returns Jan 2010-Dec 2012, S&P 500+29%)
5%
-2%
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What are the Standard Differentiators
Quantitative
Returns
Strategies
Reports
Qualitative
Brand Building
Sales Skills
Good People
We are trying to be unique in a Commoditised Business
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What Happens when an Industry gets Commoditised?
Margin Squeeze
External Scrutiny
Consolidation
Or Starvation??
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What are these Graphs?
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The Timescales are a bit different……
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…..but the Story is the same
HFs: As of 2014, 2.7 TN USD under management..
Huge capital inflows..
16bn into equity strategies alone in Q1 2014
Its all going into larger funds..
Globally 1000 funds launched in 2013 (lowest
number for 4 yrs).. >1200+ ceased
Source: HFR/ EurekaHedge
Number of US Car Manufacturers 1865- 2010
Number of Funds >50m USD AUM, 2001-2014
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How did the Car Industry Cope with Consolidation?
‘Building autos is a $1.6-trillion-a-year global industry, producing every five seconds a two-ton machine
with more than 14,000 parts from a global web of suppliers. However automakers' profit margin typically is
around 2%’
Source:Bloomberg/AutoNews
Car Makers are either Big, where the margin as a % of Value-Add is tiny
Or are genuinely special……from the Clients p.o.v.
( n.b. VW owns both Porsche and Bentley)
Who Cars/Year $ Profit/Car Margin
Toyota 9m cars 1,000 3%
Porsche 150,000 25,000 25%
Bentley 8,500 20,000 10%
VW 6m Cars 850 2%
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The Survivors Constantly Innovate and Invest In Technology to Stay Ahead
6 Dimensions of Technology
ALPHA/ R&D
CLIENT (CRM) & BRAND
VALUE CHAIN SCM/ ERP
EXECUTION
OPERATIONS
RISK/COMPLIANCE
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6 Dimensions of Industrial Technology
**These Technologies become part of the Client Brand Perception
Dimension Manifestation How Long?
R&D** New Product Features 100 years
Execution Assembly Lines 100 years
Control Less Scrap & Compliance 50 years
Finance/Operations Efficient Processes 50 years
Supply Chain/ERP Internal/External Transparency
Planning and True Costs Analysis Steel-Mill to Showroom
15 years Since the Internet
Clients Relationship** Interacting with Influencing and Tracking Customer Habits. Creating Communities
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Technology is About Managing Relationships
ALPHA/ R&D
VALUE CHAIN EXECUTION
OPERATIONS
COMPLIANCE
6 Dimensions of Technology
CLIENT /BRAND
Operations
Investors
&
Allocators GPs/
Owner
PMs
Traders
Brokers
Regulators
The
Market
Sales
Settlement
& Clearing
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6 Dimensions in Fund Management Technology
Technology Area Purpose Driver Champion
R&D Search for Alpha P&L PMs
Algos, Links Execution Efficiency
Lower TC Traders
Control Compliance Regulators L&C
Finance/Ops Transaction Efficiency
Lower Costs Ops
Supply Chain Management
Manage Data Business Efficiency
COO
Client Relationships
Raise & Retain AUM
Why We Exist All!!!
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How much effort goes into Client Relationship Technology?
In Fund Management…..seemingly not much.
89% of hedge fund investors have chosen not to invest in
at least one new fund due to concerns over lack of transparency.
Over 85% of investors would like to have their information delivered in an
electronic/data format to facilitate their analyses. (55% currently do)
Source Opalesque/Intralinks Survey, 2014
Q: What is the Largest Impediment to Investing in a Hedge Fund?
23% Difficult to Source Good Funds
22% Fees
22% Complexity of the Fund Source Prequin Survey on Institutional Investor Allocation 2014
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Compare Technology Emphasis in Different Industries
0
2
4
6
8
10 Alpha
Execution
Operations
Compliance
Community (CRM)
Value Chain (SCM)
Fund Management
0
2
4
6
8
10 Alpha
Execution
Operations
Compliance
Community (CRM)
Value Chain (SCM)
Retail Banking
0 2 4 6 8
10 Alpha
Execution
Operations
Compliance
Community (CRM)
Value Chain (SCM)
Auto Manufacturing
0 2 4 6 8
10 Alpha
Execution
Operations
Compliance
Community (CRM)
Value Chain (SCM)
Electronics
ALPHA/ R&D
VALUE CHAIN EXECUTION
OPERATIONS
COMPLIANCE
6 Dimensions of Technology
CLIENT /BRAND
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What has happened in I.T. in the Last 15 (or 150) Years?
Connectivity
Communications
Communities
SaaS Products
Availability of Computational Power
Performance and Behavioural Analytics
Leads to:
Connectivity + Analytics
2-way Behavioural Analytics
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Examples of Business Specific Interactivity in Action
Agro-Chem company is linking users into online communities of rice
farmers in Indonesia
Creating loyalty to their product.. Plenty of other suppliers, the online info
and community is unique to their customers. The data is cheap to provide, it
differentiates the Product, but it is not the Fertiliser!
Sherpa Funds Technology
Risk Analytics driven by Investors Risk Tolerances: ORS links the Investor &
the PM, increases Returns, helps raise AUM, and creates Investment
Products tailored to Investors requirements.
Other Examples: Earthstream, GM, Markit, Calastone, Rimes
These co’s are combining the power of Data Analysis, and Connectivity to change
the way their clients work with Business Specific Communication & Analysis
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Communications Tech + Analytics Tech =Unique Client Relationship Tech
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2
4
6
8
10 Alpha
Execution
Operations
Compliance
Community (CRM)
Value Chain (SCM)
Technology Development
= +
Individually, Comms and Maths have to compete with many
more established claims on your Investors’ attention
Combine them: Engage your Clients, Improve your Product and
Stand Out from the Crowd
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Filling in The Asset Management Technology Gap
Practical Implementation:
ORS: Engage Investors, Optimise Risk, Increase Returns
Dis-Intermediation: Direct Aggregation of Investor Demand
Broadcast & Community: 2-way Data Flow between Managers and Clients/Prospects
Process Change: Reduce Management Costs (Fees!) by Optimising the ‘Supply Chain’
0
2
4
6
8
10
Alpha
Execution
Operations
Compliance
Community (CRM)
Value Chain (SCM) Funds Management Today
Technology Development
Sherpa Funds Tech
Funds Management Goal
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The Big Fish is Coming
It won’t stop for a snack
as it swims past….
Keep Ahead, Differentiate
Use Business Specific Technology to Interact with Clients
How do your clients receive Info when not dealing with you?
Isolate and Emphasise your Unique Skill, let Technology
do the rest!
The Last Word: from an Expert in Selling Commoditised Products:
‘The secret to modelling is not being perfect […], what’s needed is to
bring something new’. Karl Lagerfeld
Contact: Richard Waddington, I’m on Linked In! www.SherpaFundsTech.com