Nicholas Pratt talks to Gresham House’s CTO and COO, Andrew Hampshire, about bringing digital technology to the alternative investment world.
UK-based alternative investor Gresham House was established in 1857 but was relaunched in its current form in 2014. Under chief executive Tony Dalwood, the principal aims of the relaunch were to prioritise technology as a key component, to recognise the real value in the client experience and to create a more efficient back office.
In December 2017, it launched a proprietary online portal designed to provide a personalised digital experience for investors and clients. At the time, the firm’s chief operating officer and chief technology officer, Andrew Hampshire, said the portal was a way for the firm to differentiate itself from the competition.
It may appear damning that a firm can stand out from its peers by providing the same kind of tools that most of us get from our retail banking accounts or from e-commerce providers, but the truth is that even two years on, the user experience in the alternatives world is generally far from digital.
“The portal was designed to do three things – provide information on their assets in an aesthetically pleasing way; make it clear that we are committed to investing in technology; and to help clients get under the skin of the assets in which they invest,” says Hampshire.
As an alternative investor, Gresham House often allocates capital to a number of niche asset classes, for example a forestry fund. The firm sought to use the portal to help clients better understand how the fund works – where the forests are located and how the fund’s investment has been used. Similarly, where a small business private equity fund is involved, the portal will show investors what companies are included in the fund and how the investment has looked to improve that business, says Hampshire.
“This was never about trying to save money operationally or replacing a manual process with digital technology. Alternative investing is still a people business and we want to enhance that relationship,” says Hampshire.
Interestingly, when building the portal, Gresham House decided to partner with a UK-based company called MMT Digital, which was relatively unknown in the fund management market. “The company had done a lot of work with retail firms but very little with financial services firms and we thought they could bring something really different,” says Hampshire.
It is often said that financial services firms, and fund managers especially, should take more inspiration from the retail sector when it comes to the use of digital technology and the end-user experience – two things with which the funds market has a particularly poor record.
Gresham House also worked closely with a select number of clients on the development of the portal and to ensure that the end-product was in line with their demands. And the further they got into the project, the more references were made to the consumer world – Uber, LinkedIn and Facebook – rather than other fund management firms. “The key was balancing the need for as much information as possible while keeping the design clear and simple,” says Hampshire.
Maintaining the portal requires an ongoing relationship with MMT and constant feedback from clients. And Hampshire says that a version 2.0 will be developed for 2020. One of the areas of focus in the next development stage is to move it from an exclusively post-investment portal to a pre-investment portal for processes like client onboarding.
Gresham House has also looked to use new technology for its back-office processes, says Hampshire. The firm opted for a fully cloud-based infrastructure from the outset. “We didn’t want to build something that would be legacy in five years’ time. We have also made a number of acquisitions in the last five years and thanks to the cloud, we have been able to integrate their infrastructure within six to eight weeks, rather than six to eight months,” he adds.
An internal Wikipedia
He has spent time digitising many of the firm’s internal processes, too. For example, it has sought to move all of its documentation online, creating what Hampshire calls an internal Wikipedia. He is now looking at using AI tools for deal origination – to see how data sets can be consolidated to focus on the companies that best fit its investment mandates. “Deal origination is an important process in the PE/VC world. There are a lot of companies out there and if we can use the technology to make that selection process more efficient, it allows us more time to spend on other complex issues.”
When Gresham House launched its portal in 2017, Hampshire referenced the fact that the consumer sector has “traditionally been on the front foot when it comes to innovative user engagement and is better at meeting the digital needs of clients”. The likes of LinkedIn are more transactional than the institutional or business-to-business world, he says. Consequently, it is essential for businesses in that sector to compete on that front. Alternative investment is still a relationship-driven business.
“If you’re putting $5 million into a fund, there is more to it than the transaction,” says Hampshire. “There is only so much that can be digitised or put online, so it is about striking a balance. How do we take the best bits of digital technology to improve the relationship between a fund manager and their investor?”
Ultimately, clients want first-class investment performance and that will always be the priority, he says, but there is a growing demand for a better user experience that uses digital technology. “There is an expectation that there will be a comparable digital experience in asset management with the consumer and lifestyle services they receive elsewhere,” he says.
He is also in favour of greater use of APIs – technology that is typically used to connect systems that are not designed to work with each other. “We use APIs internally to connect different data systems for our CRM systems. That couldn’t happen without APIs, so they are hugely valuable.”
In the retail banking and payments market, it has been suggested that APIs will enable individual developers to connect directly to banks, creating a mutually beneficial relationship whereby the developers reach a wider audience and the banks get to offer clients more innovative services.
In the asset management world, though, Hampshire says he expects managers to use APIs to make collaboration with digital consultants like MMT Digital simpler and quicker, rather than developers using APIs to build reporting tools separately from the fund managers. “When you compare private equity funds to a payment, there is a need for greater context when reporting on an alternatives fund that isn’t required with payments,” he says. “It is hard to report on the performance of the fund if you are completely removed from the assets themselves and the end investor.”
We will see more innovation in the market as a result of a number of things, he says. “We have an exciting fintech sector in the UK and more start-ups than we did ten years ago. So you will see more asset managers working with smaller firms with specific expertise to bring something new and different.”
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