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FundFire: COVID Speeds Up Hedge Fund Moves to Automate Sales Effort

Alexandra Hamer

Alexandra Hamer

Canoe Intelligence President Seth Brotman comments on how the COVID environment has accelerated and enhanced discussions around technology-enabled solutions.

A majority of investors believe alts managers could be doing more when it comes to investing in their digital infrastructure, according to a new report. And hedge funds are the furthest behind when it comes to automating their marketing and investor relations functions.

Sixty percent of alts investors said their managers’ current digital infrastructure to support investor needs was sufficient but that “investments would be beneficial,” according to EY’s 2020 global alternative fund survey, which polled 230 managers, including 110 hedge funds, and 70 investors. Hedge funds have a slight leg up on private equity firms, with 39% of investors saying their digital infrastructure was highly advanced, compared to 34% of private equity firms, the survey found.

For hedge funds, fund accounting and the middle office are the areas with the highest levels of automation for processes conducted in-house, while manual-intensive processes continue to dominate when it comes to investor relations and marketing. “Although a high touch personal experience is needed, that experience can be enhanced by technology and meaningful investor reporting,” the EY report noted.

Allocators are continuing to demand access to more and different data, says Ryan Munson, wealth and asset management partner at EY. That’s pushing managers to invest and look to automate areas such as subscription and redemption documents, which can be 50 to 100 pages long and require manual signatures, he adds.

“We are moving away from documents being passed around in PDF or hard copy and going to a click-through solution,” he says.

Funds that built out their technology in recent years have seen the benefits since the COVID-19 pandemic pushed the world into remote working. “Those investments have really paid dividends this year where employees haven’t been in a central location,” Munson says.

Five key “pain points” exist for allocators when it comes to dealing with data: ingestion of documents, categorization, pulling data from the documents, validating the data, and delivering data downstream, saysSeth Brotman, president of Canoe Intelligence, a financial technology company focused on data management for alts investors. Allocators are still being inundated with thousands of PDFs, he adds.

“The COVID environment has really accelerated and enhanced discussions around technology-enabled solutions,” he says. There is increasing interest around utilizing machine learning, natural language processing, and artificial intelligence to help automate and improve more processes, Brotman adds.

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