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Solving for Business Complexity and Talent Shortages in Alternative Investments

Banking and Capital Markets | March 4, 2020

On February 25th, ThoughtFocus hosted a dinner event at the Andaz, on Fifth Avenue in New York City with attendance from over 30 CTOs and CFOs from the world’s leading alternative investment firms. The event featured a panel discussion on “Scaling for Business Complexity and Growth Amidst Talent Scarcity”, a problem nagging all CTOs in this sector who are faced with accelerated growth and challenges in hiring to keep pace. Our panelists featured, Bill Murphy, CTO of Blackstone, Rajiv Goyal, EVP of ThoughtFocus, Sandeep Gupte, Head of Alternative Investments at ThoughtFocus and Miten Marvania, COO at Agio.


Guests had an opportunity to network and exchange their views on issues common to the private equity and hedge funds. Below are key takeaways from the evening:


The Alternative Investments industry has grown exponentially over the past decade and Assets Under Management (AUM) now surpass $4 trillion. This growth has in turn, increased business complexity. Firms have expanded across asset classes, added compliance measures, increased requirements for LPs, and are now dealing with data privacy/security, and the move to cloud.


In parallel, the industry is dealing with an acute talent shortage with thousands of IT jobs going unfilled. Alternative Investment firms are competing for the same talent as the tech giants. This scarcity of talent is forcing the industry to rethink how works gets done and is driving innovative new delivery models


Alternative Investments has not fully exploited technology
Bill Murphy spoke about how the industry is still focused on operational efficiency and has not yet tapped technology and harnessed data that can improve decision making and address new aspects of the business. Most of the alternative assets sector is under invested in technology, much to its detriment.


The industry has a small technology footprint, but big expectations
Rajiv Goyal commented that challenges of the Alternative Investments firms are unique in comparison to other sectors, including banking. When it comes to the level of attention and the quality of service, PE and Hedge Funds are at the top of the pyramid. ‘White glove service’ is part of their culture. However, because of the smaller technology footprint and limited back office services, this sector draws limited attention from the large service providers. With limited internal resources, CTOs need to partner with the right technology firm that has the domain knowledge and values you as a premier customer.


Solutions and processes depend on strong data governance
Miten Marvania pointed out that Alternative Investment firms bring added complexity, especially with data. He noted, “What we are finding as the number one challenge for PE firms and hedge funds and other types of asset managers is, they are not sure where their data is. Data mapping is by far the number one thing that comes up in our conversations”. The challenge is developing a strategy that allows the firm to scale and meet business demands while protecting and ensuring data security.


Technology upgrades are altering Build v. Buy decision making
Sandeep implored firms on a growth trajectory to engage senior management in support of the technology agenda because a growing firm needs to be prepared for the complexity that comes with larger AUM. Traditional, build v. buy decisions are being challenged because without the technical debt, nimble customized solutions that leverage new technology can be delivered faster.


Talent scarcity is widespread and painful
Bill Murphy said that talent scarcity is the number one problem facing the industry despite efforts to provide interesting challenges, good compensation, team environment and culture. Tech giants like Google, Facebook and Apple themselves have shortages and are only making harder for the Alternative Assets industry to find talent. Miten added that talent retention is an equally tough problem. Retaining talent also requires providing exposure to a variety of growing technologies, which is harder in a financial environment.


Blackstone decided on ThoughtFocus’ Hybrid Captive to scale its business
The issue then becomes getting management’s backing in order to do it right the first time, otherwise, it’s extremely hard to execute long term.Bill described the Hybrid Captive as his preferred option to get the necessary scale for Blackstone offshore, that wasn’t growing fast enough in New York or staying in budget. But any offshore team needed to be an extension of Blackstone with everyone on the extended team feeling like they are part of the same organization. For that, Bill needed control and transparency in the outsourcing engagement. ThoughtFocus’ Hybrid Captive provided that option and made offshore team feel like they’re part of Blackstone’s mission, exactly like all the tech people in New York. It’s not the traditional outsourcing arrangement. It is strategically a different model that was key to the huge success that Blackstone saw in IT fulfillment.


“Best in class” today isn’t good enough
Many alternative investments firms think they run the so called “best in class” solutions for their business problems. However, these systems may have been designed decades ago and can bring their own technical debt. According to Sandeep Gupte, “These systems may have layers of technology that are legacy and restrict you from taking advantage of some of the newer, more dynamic and agile technologies available today, be it the cloud, AI, or machine learning”. It’s a challenge to deliver the solutions for each constituent, from traders to accountants without adding to the firm’s technical debt and overhead.


Retention is built into the Hybrid Captive
According to Bill, details like career paths also need to be addressed in offshore deals. but many firms simply don’t want to deal with it. Professionals want career progression. “This means you care about them, just like you care about the person three doors down from you in New York and own their career. If you could do that, you can keep them from leaving”.


Get it done right the first time or pay later
Bill emphasized the need to get things right the first time to avoid future problems. “It’s like putting paint jobs on houses that are going to fall down eventually. It looks nice for a bit, but ultimately the problem surfaces”. Budget constraints often create trade-offs between cost efficiency and functionality.


Hope is not an option
As a parting advice to his CXO peers, Bills message was “Hope is not an option when scaling with a tech service provider. An outsourcing SLA is not going to protect you from downside scenarios. Strategically invest in whatever you do. You have to embrace the hard work of technology and operations to get a value from it. Be in control”.


For more information on ThoughtFocus and its solutions in Alternative Investments or solutions for scaling with global resources using the Hybrid Captive, contact Bill Hicks at (610) 220-5000 or