How can an organisation with a relatively small investment team such as a family office deal with the deluge of data that can inform investment processes today?
While some family offices show great entrepreneurial spirit, to date many have been slow adopters of technology tools for efficient portfolio management. But that is changing as the sources of available information continue to mushroom, and some are even starting to set up dedicated data science teams, following the example of hedge funds like Winton Capital and Two Sigma.
Mike Simcock, CEO of the London-based fintech group, ClearMacro, which offers a dashboard of asset allocation processes influenced by a select range of data sets, says he has encountered a particular sort of pain point with family offices. Often they can be running a range of tactical and systematic asset allocation strategies on an excel spreadsheet, Simcock says.
Portfolios are increasingly likely to be constructued by algorithms, not humans. “If you are the asset owner at the family office, you are not typically the one managing the spreadsheet; you will have an analyst or CIO working for you. So there is a lot of business risk for the asset owner if that CIO or analyst leaves. There is a lot of error risk built in the process of using the spreadsheets.
“What is required is a sort of institutionalising of these strategies and frameworks, so that if the CIO or the analyst leaves, the process of asset evaluation and allocation remains straightforward and transparent within the family office on a bespoke platform.”
London-based Neudata, which scouts new and interesting datasets, and connects data providers with hedge fund clients, has been doing some data-dealing with family offices. Rado Lipuš, founder and CEO of Neudata, who deals with many entities looking to monetize their data, said family offices were both entrepreneurial and possess a good understanding of investment processes, which most data providers do not.
“They (family offices) are often quite open-minded. They perhaps have a different perspective because they are investors as well and so they realise the importance of data,” he adds.
Source: Allison, Ian., November 28, 2016; http://www.famcap.com/articles/2016/11/28/how-can-family-offices-deal-with-the-big-data-revolution