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Asset allocators gaining greater agility in their multi-asset class portfolios

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As asset owners and allocators look to gain greater transparency and analytical insights on their multi-asset class portfolios, technology platforms are being sought out to build strategic partnerships. One recent example of this was State Street Corporation, which announced on 19 September that it had partnered with Solovis to improve transparency, alleviate complexity and streamline performance tracking and regulatory reporting for clients.

Solovis is a multi-asset class portfolio management, analytics and reporting platform and was founded six years ago by Josh Smith, the current CEO, and Caleb Doise. 

As institutions ramp up their exposure to alternatives, led by private equity, and other private market funds, alongside traditional asset class investments, they are looking for ways to improve overall visibility at the portfolio level. The data and reporting complexity that this entails can be substantial. But without that visibility, asset owners run the risk of encountering liquidity and performance issues that could have repercussions in terms of meeting their long-term liabilities.

Visibility is a key theme on the platform; more accurate information allows investors to make better investment decisions, rather than making those decisions in a siloed way across different asset types.

“Our co-founder and CEO Josh Smith came out of the institutional investing space and had been doing some consulting work with endowments and foundations, in particular, and as the market evolved he saw the opportunity to design a technology platform from the bottom up that was specific to the multi-asset class portfolio,” explains Laura Mooney (pictured), Chief Marketing Officer. 

What is unique about Solovis is that it was built, from day one, to support the multi-asset, multi-currency analytical needs of asset managers and asset allocators alone. By doing so, the platform attracted endowments and family offices as early adopters. In those early years, the Solovis team listened to what these investors were saying. This helped evolve the platform to best handle how data was aggregated and organised to allow for effective portfolio analysis. 

UC Investments, the investment office overseeing the University of California’s USD125 billion multi-asset class investment portfolio is one of the latest adopters of the Solovis platform as it seeks to overhaul its legacy technology and build a more holistic, agile platform to meet current and future demands. Explaining the decision, Arthur R Guimarães, Chief Operating Officer of UC Investments said: “The Solovis platform gave us the agile, flexible platform we needed to improve data management, streamline workflows and align our investment teams on a single platform for continued innovation and growth.”

UC Investments expects to make cost savings of USD2 million per year over the next decade.

Commenting on the UC Investments project, Mooney tells Hedgeweek: “It was a complex undertaking for us as an organisation. We were really pleased with their perspective on transformation holistically across their organisation and what they’ve been able to achieve in terms of cost saving by implementing Solovis  and in terms of the greater agility and collaboration that they’re realising across their investments and operational team.”

Currently, Solovis has approximately 75 LPs using the platform, the majority of which are US-based. 

Roughly one third of these are endowments, a third are family offices (both single and multi-family offices), some 15 to 20 per cent are pensions, with OCIOs representing an emerging growth area. 

Mooney explains that Solovis aggregates both public and private data sources which it then uses to help clients normalise the reports they are receiving from their GPs. “Once we get it all normalised in the system, we’re able to even out all the anomalies and time lags across different asset classes and aggregate them into a single view that can be shared across the different investment teams. It really serves to break down the organisational structures where they might have a different team managing each different asset class. 

“Being able to have this shared view of the entire portfolio, they’re able to communicate across teams and think more strategically and holistically about allocations across the portfolio in terms of risk exposure, liquidity etc, and better plan for cash flows in and out.

“In addition to the technology platform, we also have an analysis service where we become an extension of our clients’ operations team,” explains Mooney. 

One issue for asset owners and allocators to always bear in mind when using new data aggregation and analytic solutions is that they are confident that the picture being presented to them, at all times, is as accurate as possible. And that the end user is not seeing false positives in the data. 

At Solovis, the platform is integrated with each client’s custodians and fund administrators, taking in the accounting book of records along with data from other systems and then reconciling it to make sure everything is as it should be. 

Mooney illustrates the point with an example:

“With respect to UC Investments, they use State Street as their custodian and administrator and BlackRock for risk. Pulling data in from both those systems and then aggregating it, we discovered there were time lags and UC had not fully recognised that some of the data was misrepresented as a result. Because reports from fund managers had a time differential it meant UC was not getting an accurate representation of performance at any given time. In other words, an accounting book of record may not be the best choice for a performance book of record. That is one of the factors that led to State Street’s recent announcement on its partnership with Solovis.”

The Solovis platform was designed, she says, to reconcile all of that information and then be able to give investments and operations the ability to see the data from whatever perspective they want to view it. “So if they want to see the accounting view, they can, if they want to drill down into a specific pool of capital and just look at one area they can do that, if they want to look at just their private equity holdings they can do that, if they want to look at the portfolios from an exposure perspective or a liquidity perspective, they can do that. It is a flexible platform that gives you a 3D view that has never existed before.”

Over the next 12 months, Solovis will be looking to roll out a number of initiatives. One will be a new set of decision analytics tools designed specifically for investments teams to help them get even greater clarity on information and how they’re using that information to support decision making across the portfolio. 

A second initiative will be to build deeper, broader risk capabilities “because we’ve gotten a lot of feedback that managing risk is becoming even more important to the LPs”, remarks Mooney. “We will probably bundle that into its own application within the platform. 

“And thirdly is to broaden the ecosystem. We’re partnering with the largest custodians and administrators to make sure that we’re really tightly aligned with them so that when we go to the largest pensions funds and foundations they don’t have this disconnect across their accounting system, with respect to portfolio performance. 

“We want to make sure they have an agile, fluid environment that they can operate in.”

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