Hey Due Diligence, Knock Knock…

Hey Due Diligence, Knock Knock…

Investor Town

What does a day at an end investor or an investment consultant who hires external managers look like?

**Susan Lee (CIO):** Any ideas on what managers we should be looking at to add
positive convexity to our portfolio? How about an allocation to European recovery?
And while you are at it, let’s see if we have any unwanted and unintended pockets
of exposures to CNY downside.

John Davis (Investment Officer): Once I get through aggregating
all information from managers in excel, I’ll run an analysis
and will come back with thoughtful suggestions. But before that,
I have to go over my inbox and daily monitoring of the portfolio.

Technology: Knock, knock. May I come in? I have two

gifts with me, data and decision analytics 🙂

Sorting through emails, pouring over documents, extracting information out of documents in internal systems, follow-ups with colleagues and investment partners, verifications and reference checks, reporting for end clients or investment committee…the list just goes on. This is business as usual, with the VIX is say at 11 and no new funds are launched. This leaves little time to reflect on investment decisions, running ad-hoc analysis or forming a thoughtful investment thesis.

Manager City

What does a day at an asset manager investor relations team look like?

**Mary Heinz (Head of IR):** What are our top 3 investor requests,
and how soon can we get this done before the month close?

Gerald Jackson (Director of IR Operations): Once we wrap up the
RFP for
New State Pensions, I’ll get started on Modern Fund of
and World consulting firm database request. All are similar,
yet different. So we can’t just copy and paste, or else the output
will be of poor quality, and needs coordination with compliance

Technology: Knock, knock. Will you let us in? I come

bearing gifts along with my friends (data and decision analytics) :).

Biggest pain-points that investor services / IR operations team face are in three areas:

  1. Coordinating internal approvals before responding to investor requests (Inbox management)
  2. Multiple investors asking for similar information in different format (Hello copy paste)
  3. Extended follow-up requests from investors

###The future is about to change

John and Susan from Investor town, and Mary and Gerald from Manager city are cautiously optimistic….

What does the due-diligence of future look like? Given the increase in data volume as well as limitations on budgets, technology has the ability to scale limited resources and play a key role in helping both investors and managers meet their fiduciary responsibility.

**Collaborate easily and more often**
*Internal Collaboration:* Make it possible for the investment team to stay connected with the entire research process. What if the team could collaboratively come to an investment decision and easily track “who’s on first?”
*A technologist would say: Workflow automation, Notification queues*

External Collaboration: Communicate more openly with investment mangers. Utilize technology to clarify misconceptions of the manager’s process, synthesize views on manager comparisons and relay possibly negative news or conclusions can facilitate communication and ease the pain of not wanting to hurt anyone’s feelings.
A technologist would say: Bilateral interaction, mutualized infrastructure

Managers, when armed with the perception of their products, can not only hone the marketing material and presentations that they give, but improve their internal process accordingly. Increased flow of information between both parties can help to mitigate misinformation, improve relationships and facilitate communication throughout the industry.
A psychologist would say: Human learning, and relationship building

**Analyze new things**
In today’s day and age, it is nearly impossible to assess a manager using a simply formulaic approach. Analysis of qualitative data and meetings helps understand the very nuanced and unique strategies different managers employ. Technology can simplify the process of evaluating all these data points and get investors 60-70% of the way, so they can hone their questions and topics they would like to cover in a manager meeting, creating an efficient and targeted due diligence process.
*A technologist would say: Big Data Analytics (buzzword alert), AI Rules*

**Customize with an eye on standards**
Customized research is key to being able to understand a manager’s individual nuances and strategies. It creates frustration for the managers, when majority requests are custom. An optimal approach would be building customized requests on a standard base which would account for 75-80% of the information requests to the manager.
*A technologist would say: Start with data trees, and algorithms, and extend with machine learning.*

Inviting technology into the due diligence process would serve to automate inefficiencies and allow for better, more informed investment decisions, faster. You hear technology knocking. You gonna answer the door?

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