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Top factors to consider when selecting a Technology Solution for Alternative Investment Management

The Alternative Investment business is currently booming with deal volumes at an all-time high. Continued growth in this business has made the lives of Alternative Investment managers more hectic, compelling them to look out for technology solutions that can help optimize the investment operations. Each PE/VC firm, depending on its region and industry focus, has unique investment, monitoring, and divestment strategies. Complexities are embedded in their core business functions due to this uniqueness thus a good software for Alternate Asset industry should support such “unique” core business functions.

New age technology solutions such as PE Front Office are available in the market which address the specific needs of the Alternative Investment managers ranging from Deal Flow Management, Fundraising, Investment Management, Portfolio Monitoring, Investor Reporting to Fund Administration. Depending on the solution provider and the customer needs, these technology solutions can be offered as Software as a Service (SaaS) or can also be deployed on the client premises. However, while selecting the most suitable Alternative Investment Management software, each firm should assess areas where technology can assist in delivering efficient operations and managing funds. This assessment should consider the size and scale of funds and portfolios being managed currently as well as in future. The tool should bring a step-change in the efficiency of the business functions. From experience some critical factors that are imperative for fund managers while evaluating and selecting a suitable tool are:

  1. Modular & Quick to Deploy: Investing in the right solution can have considerable benefits to the PE/VC firms, but this investment is often delayed due to fear of the risk of failure. Software implementation cycles can run into months resulting in loss of valuable time, effort, and resources. Solution providers should realize that time is a valuable commodity for Alternative Investment managers and hence must offer short implementation cycles, committing to deploy the solution in a span of 4 – 8 weeks preferably taking a modular approach rather than a big-bang rollout.
  2. Ease of Configuration & Customization: Different Alternative investment managers have different processes and thus unique challenges. Hence, even the technology solutions that are specifically designed for the Alternative Investment Management might still not be able to completely address the challenges of the investment manager. There will always be a scope for customization to plug the gaps in system capabilities and customer requirements. A technology solution with flexible framework for quick and inexpensive customizations, catering to the tailored workflows and internal processes of the customer should always be preferred.
  3. Seamless Integration: Alternative Investment managers use different systems for different business processes, resulting in data silos residing in different locations. To enhance operational efficiency all these systems need to complement each other and function as one unit. Technology solutions should offer flexibility to seamlessly integrate with third-party systems thus allowing for data ingestion and export to other back-office systems.
  4. Reporting & Analytics: Alternative Investment managers spend considerable amount of time crunching massive amounts of data to arrive at business decisions and accurately report investment performance to investors. Whether looking at a pipeline deal or portfolio company or fund, it is critical for firms to draw comparisons and conduct analysis across various companies on desirable parameters and to have meaningful real-time assessment of the performance. Tech solutions offering strong reporting and analytics tools capable of presenting complex scenarios and generating comprehensive reports with a single click of a button can make the lives of Alternative Investment professionals a lot easier.
  5. Secure: Data is the new gold and a prime target for cyber criminals. Data Security holds utmost importance for an industry like alternative investments, which is highly driven by data. Technology solutions have to necessarily ensure data security and continuously invest in best technological practices, such as encryption, multi-zone deployment, private key access, and auditing. Alternative Investment managers should prefer solutions whose technology architecture covers all aspects of security across data, networks, and servers.

Authored By: Ankur Agarwal (Co-founder & CTO, PE Front Office)

Published in: The Times of India