Institutional investors and fund houses across the world are grappling with how best to introduce or upgrade their data systems and technology tools to make their lives easier, and become potentially better investors. Australia’s Future Fund is at the forefront.
For nearly three years, the A$154 billion ($106.41 billion) sovereign wealth fund has been rolling out a technology plan to improve its data management capabilities and tech support for its investment teams.
Richard Large, a former employee of Aberdeen Asset Management and more recently boutique firm Independent Investment Partners, was hired in the new role of chief technology officer in February, and he’s overseeing the conclusion of this plan. “I wasn’t called in as a rescue job. Future Fund from a technology point of view was already in great shape,” he told AsianInvestor.
Since joining the fund, Large has focused on overseeing the final stages of building data management and consumption capabilities that can adopt new sources of information, make them readily available across all of Future Fund’s investment teams, and allow them to be easily accessed via user-friendly dashboards (information management tools that track, analyse and display key metrics and data points).
The key purposes? Improving efficiency and accuracy.
“This gives us much more effective management of data through its life cycle. It also improves its quality and the speed by which it gets to investment managers, and how they access it,” said Large.
Future Fund has been willing to spend substantial amounts on it too. Large declined to specify how much, noting only that it was an “appropriate” amount for a project of this size. But the figure is believed to be well into the millions of dollars.
It’s hard to quantify exactly how much improving data access and availability benefits the fund’s ability to improve investment returns. But better data systems free up internal analysts and portfolio managers’ time.
“In the past the [internal investors of Future Fund] needed a bespoke manager or they had to know who to talk to in order to get the data they wanted,” said Large.
“If we are freeing up two or three of four hours for the analysts to spend on more value-added activities, that leads to productivity gains,” he added.
The new technology puts all of Future Fund’s investment data into one place (commonly called a data warehouse), and in comparable formats. Plus the system’s search tools to make it far quicker for the investment teams to find the data they want, and combine it with other information to spot theories or patterns over both public and private assets.
Large claimed the new data system has impressed the investment teams, who asked for tailored dashboards. Plus it gained the praise of the board of directors at Future Fund.
“We held a demo of the technology to the board [earlier this year], focusing on holdings in our portfolio, and minutes into the demo the tech became invisible. Instead, the board members were asking about our infrastructure holdings. We spent five minutes on the demo and 25 minutes discussing infrastructure.”
Future Fund’s own investment focuses have also helped. “We have a big advantage of having great relationships with the investment teams, especially on the private equity side,” said Large. “Our tech can help the PE (private equity) team make informed investment decisions and on the other side PE can give us access to startups they have spotted and invest into.”
One example was Elastic, a software company that helps other firms embed search functions in their apps. Future Fund acquired an 8.2% pre-IPO stake in Elastic (the company went public in September last year) and Large said its search analytics visualisation capabilities helped Future Fund measure the consumption of its internal dashboards and APIs (application programme interfaces).
The sovereign wealth fund's technology team is keen to work with its investment team on future investment opportunities too.
While Large is happy with how things have progressed so far, he is already plotting the fund's next steps. “I am about to kick off a refresh of the whole technology, data and analytics strategy."
He aims to begin with a six-month period of research on what the next three-year technology plan should look like. The plan itself is likely to officially start in a year’s time.
Large says he has identified eight key different areas of tech competence that Future Fund wants to refresh in the next three-year plan. These are: investment and corporate systems; workplace technology; engineering; emerging tech & innovation models; architecture; risk & security and operating models.
“We are putting into place an operating model to enable innovation, including experimentation in laboratories or by partnering with tech companies or universities," he said.
Updating data systems and software sounds requires a big investment of time, energy and money. Is it worth it for an asset owner? Large is obviously biased, but he believes the importance of asset owners investing heavily into their technology cannot be understated.
“This is determining ways of finding insights and creating efficiencies. The need for tech is ongoing and we spend a huge amount of time talking technology in the management committee and across the agency in general.”
And what advice would he offer asset owners looking to update their fintech needs? “Look at it from the investors’ point of view in terms of how to take jobs like creating spreadsheets and data and trace them back to how they are created, and how much effort they take, and what accuracy you lose in the process,” he answered.
“The other way is to look at the basics, the data platform, and consider what you are doing yourself that someone should do for you. If someone can do it better and cheaper than you, you should outsource it, as long as you trust them to do it. Ask yourself what you really need to do yourself, and make hard choices.”