US-based Navatar Group is a leading provider of cloud computing for Wall Street firms, but increasingly that client base is widening out to alternative investment managers as they start to fully appreciate the benefits of cloud systems and how they can streamline their operations.
Speaking with Hedgeweek, Alok Misra (pictured), co-founder and principal of Navatar Group, says that the acceptance of cloud computing among hedge fund and private equity managers is growing “month by month”. “A year or two ago people were still asking questions around data security, but I think those worries have now largely disappeared.
“Most alternative managers now realise that data is actually a lot safer on the cloud, managed by professionals, than it is within their own building,” says Misra, confirming that roughly 400 clients from the alternatives industry (and corporate development groups in firms like BlackBerry) are now using its cloud-based systems.
With technology advances constantly improving cloud capabilities, the fact that everything is done remotely has a huge cost advantage to managers who face increased costs of doing business because of ongoing regulation.
“Cloud computing turns out to be a great thing for them because it’s providing them with the exact type of software they need at much lower cost. It also provides them with connectivity to people they may want to do business with, which might not necessarily be possible with on-site software,” comments Misra.
Historically, alternative investment managers have always gone out and bought hardware and software, then hired IT consultants or extra staff to tailor the software to their trading needs. This approach ties managers in to service and support contracts, they’re stuck with the systems and it becomes a time and cost-intensive exercise.
Cloud computing is changing that dynamic, particularly for managing investor relationships and handling middle and back office functions. Furthermore, as regulation continues to change, managers need to react quickly and adjust their systems. Increasingly, it seems, they appreciate the streamlining advantages that cloud-based systems offer.
“With our cloud system, we take care of everything and use a simple “pay as you go” model. One of the big drivers that is sending business our way is that managers understand its flexibility. They can change things easily without having to go out and spend hundreds of thousands on new systems. In addition, they don’t have to spend too much time/money on software evaluation. All they have to do is rent a cloud application for a year, and then re-assess the relationship.”
Navatar’s hedge fund cloud is built on Force.com, the leading cloud platform developed by salesforce.com, and supports a variety of investor-focused tasks including the fund raising process, generating investor reports, and managing investor relations. The private equity cloud goes further, allowing managers to track deal flows, track the performance of target companies, manage the fund lifecycle and develop an understanding of how they intend to get returns back to investors.
Managing data flow from different systems can be challenging, particularly as most CRM systems run separately from investor portals such as deal rooms that are used to communicate with investors. “Previously they had to maintain all their data in two different places. We are now able to solve that problem with the cloud because all the data can be stored in a single location.
“That helps manage the fund raising, deal and portfolio processes, and at the time same provide a portal for managers to directly communicate with investors, bankers, intermediaries and so forth. That’s the beauty of the cloud. You can connect all these different parties seamlessly,” says Misra.
Right now, Navatar are busy investing further in technology and partnerships to provide such an integrated solution. But it takes time, particularly with data vendors.
“The problem is that managers might be using a data vendor, a separate CRM system, a deal room, but none of these systems are able to work together,” says Misra. This makes work flow inefficient, with managers having to log in to separate systems.
“We’re working on tying everything together so that clients won’t have to go out and sign five different contracts with vendors.
“We’ve already launched the deal marketplace, and we’re currently working on the deal rooms which we hope to have in place in six months. We are in complex negotiations with the data providers, educating them on the larger opportunity through the cloud. But now that managers are more aware of the benefits of cloud systems, they’re increasingly asking data vendors ‘Why can’t this data feed into a single system, where I need it, why do I have to go and sign a separate contract?’
“As with everything, change only happens when clients realise it’s possible and force the vendors.”